Major indices ended Friday deep in the red; a mixed bag of earnings as well as concerns over economic growth in the US and elsewhere left investors pessimistic heading into the weekend.
SPX closed Friday down 22.5 points or 1.1% at 2079.65, posting a loss for the week of 2.2%.
Below is the current open position status:
SPX Weekly Iron Condor
This weekly position was entered Friday; position details below:
- SOLD SPX July 5 2130 Call, 1.05.
- BOUGHT SPX July 5 2140 Call, .40.
- SOLD SPX July 5 2050 Put, 3.20.
- BOUGHT SPX July 5 2040 Put, $2.40.
Order was filled as an "Iron Condor" for $1.45 net credit (all four legs).
Margin/Risk is calculated by the width of the wings ($1,000), less credit received.
Margin/Risk for this week's trade: $855.
Target Gain: 7% of margin/risk or $60.
Max loss: 10% of margin/risk or $85.
The risk graph showing the position as of the close is below:
SPX June 5 Weekly Iron Condor
My broker's platform is not posting correct prices on SPX this morning, but as the risk graph indicates the position will benefit if the market rallys early next week.
Our "good to cancel" exit order remains in place to close the position when the debit reaches $.85, which would be target gain. The position will be closed at target gain, or if the pre-set max loss of 10% is reached. Next week brings the FOMC meeting and announcement on Wednesday, so it is recommended to exit the position regardless before the announcement. While no surprises are really expected, that news can often create volatility that could hurt a short-term position with little time to recover.
Below is the 6 month chart showing the short strikes:
SPX 6 month chart
RUT August Iron Butterfly
The monthly position was opened on July 20, as follows:
Original position at entry:
- SOLD RUT August 1260 Call, 19.55 credit.
- BOUGHT RUT August 1310 Call, 1.90 debit.
- SOLD RUT August 1260 Put, 20.90 credit.
- BOUGHT August 1210 Put, 7.40 debit.
Order was filled as an "Iron Condor" for $31.15 net credit (all four legs).
Additional Order to cut Deltas on upside:
BOUGHT RUT August 1320 Call
Order for extra long call was filled for $1.10.
On Friday, July, the position was adjusted to the downside as follows:
BOUGHT RUT August 1260 Put, 32.40 debit.
SOLD RUT August 1210 Put, 11.60 credit.
SOLD RUT August 1240 Put, 21.90 credit.
BOUGHT August 1190 Put, 7.40 debit.
Net debit (all four legs): $6.30
The position is now a 20 point wide Iron Condor, with the short put strike at 1240, and the short call at the original 1260 strike.
Below is the risk graph of this position as shown on my broker's platform:
RUT August Iron Condor:
As of the close, the position is showing a gain of $125. RUT closed Friday at 1226, down 19 points or 1.52%
The continued selloff into the afternoon brought RUT to the next downside adjustment point. If RUT does not move back up above 1230, the guidelines call for the put spread to be rolled down another 20 points. It is a trader's choice whether to exit the position or make the second adjustment. As long as RUT does not break below 1220, I will adjust it for the second time. The adjustment would be:
- BUY RUT August 1240 Put
- SELL RUT August 1190 Put
- SELL RUT August 1220 Put
- BUY RUT August 1170 Put.
If this adjustment is made, the position would then be a 40 point wide Iron Condor. If RUT does not rally Monday and falls below 1220, the position will be closed.
I thought it worthwhile to post the chart of the volatility index VIX below. Despite the market selling off as much as it did yesterday, the VIX only spiked 8.7%. I would have expected more of a pop with the broad indices down so much. Next week could be a very interesting week to see if there will be a bounce here, or continued uncertainty with the FOMC meeting and announcement on Wednesday.
VIX 6 month chart:
Next week's economic news is highlighted by the FOMC meeting and the announcement at the conclusion on Wednesday. A recap is below:
8:30 am Durable Goods Orders
10:30 am Dallas Fed Manufacturing Survey
FOMC Meeting Begins
9:00 am S & P Case Shiller HPI
10:00 am Consumer Conficence
10:00 am Pending Home Sales
10:30 am EIA Petroleum Status Report
2:00 pm FOMC Meeting Announcement
8:30 am GDP
8:30 am Jobless Claims
9:45 am Chicago PMI
10:00 am Consumer Sentiment
Trade updates will be posted as appropriate.
As always, stay keen on your risk management and trade carefully,