The Holiday-shortened trading week ended on a quiet note; but it is anyone's guess as to how the market will open on Monday.
Thursday was a low volume, mellow trading day as investors cleared out for the Holiday weekend. The monthly employment numbers were released at 8:30 this morning; the US gained only 126,000 jobs in March. This was the smallest gain since the end of 2013. Now it is a "wait-and see" game to see how this is digested when the market re-opens Monday. While futures reacted negatively as of this writing (ES dropped 18 points), that dip is not indicative of what Monday will bring.
Below is the current open position status:
We only have one open position on at the moment. Because of the added risk of the 3-day weekend following the jobs report, the SPX Weekly Iron Condor was not entered. Sometimes the best trade is the one not taken; I'm happy to be on the sidelines for a short term trade this weekend.
RUT April Iron Butterfly
This monthly position on RUT was opened Thursday, March 19; details follow:
Order executed for this new position:
- SOLD RUT April 1250 Calls, 20.70.
- BOUGHT RUT April 1300 Calls, 2.60
- SOLD RUT April 1250 Puts, 19.80
- BOUGHT RUT April 1200 Puts, 7.00
Order was filled as an "Iron Condor" for $30.90 net credit (all four legs).
Additional Order to Cut Negative Deltas on Upside:
- BOUGHT RUT April 1310 Call
Order for extra long call was filled for $1.35.
The day after trade entry, RUT hit the upside adjustment and the call spreads were rolled 20 points. The adjustment details are:
RUT Upside Adjustment March 20
BOUGHT RUT April 1250 Call, 26.20 debit.
SOLD RUT April 1300 Call, 2.90 credit.
SOLD RUT April 1270 Call, 13.80 credit.
BOUGHT April 1320 Call, .70 debit.
Net debit (all four legs): $10.20
The market reversed to the downside, and the first downside adjustment trigger was hit. The put spreads were rolled as follows:
Downside Adjustment March 25:
BOUGHT RUT April 1250 Put, 23.75 debit.
SOLD RUT April 1200 Put, 7.70 credit.
SOLD RUT April 1230 Put, 15.40 credit.
BOUGHT April 1180 Put, 4.90 debit.
Net debit (all four legs): $5.55
The sell-off continued on Thursday, and the position was adjusted to the downside once again. Details of the second adjustment:
Second Downside Adjustment March 26:
BOUGHT RUT April 1230 Put, 20.30 debit.
SOLD RUT April 1180 Put, 6.60 credit.
SOLD RUT April 1210 Put, 13.00 credit.
BOUGHT April 1160 Put, 4.00 debit.
Net debit (all four legs): $4.70
Below is the risk graph of the adjusted position as of the close yesterday:
RUT April Iron Condor:
The position is now a 60 point wide Iron Condor, with short call strikes at 1270, and short puts at 1210. It is -$(32). There are no further adjustments planned for this position; it will remain open as long as RUT stays between the short strikes and the pre-set max loss is not reached. While target gain as per the guidelines is 5% of the gross margin or $250, I will evaluate as time progresses whether to exit the position for a reduced gain since it has been adjusted three times.
The RUT 6 month chart is below indicating the short strikes:
RUT 6 month Chart:
RUT closed Thursday at 1255.65; up 4 points from the previous day and just about flat for the week losing only 2 points.
For those unfamiliar with the strategy, the trade management guidelines were updated on October 22, 2014, and can be found here:
Link to Articles
Next week's economic news is light; the highlight will likely be the FOMC minutes due out Wednesday afternoon. A recap is below:
10:00 am ISM Non Manufacturing Index
10:30 am EIA Petroleum Status Report
2:00 pm FOMC Minutes
8:30 am Jobless Claims
8:30 am Import/Export Prices
Next week is the planned entry for the SPY Iron Condor for the May monthly cycle. Monday will be 39 days to expiration; so we will plan to enter the position sometime next depending on market conditions and available credit. For those unfamiliar with the trade, guidelines were last posted on September 10, 2013, and the article can be found at this link: Link to Articles
Position updates will be posted as appropriate.
Enjoy the long weekend!
As always, stay keen on your risk management and trade carefully,