After another choppy week, investors appear to be more convinced the Fed will move forward with a rate hike in September.
Friday's non-farms payroll report showed no surprises, the US gained 215,000 jobs in July and the unemployment rate remained the same at 5.3%. No surprises in this report doesn't increase the likelihood of a rate hike, but it also doesn't decrease the likelihood.
Indices across the board posted losses yesterday. SPX closed at 2077, down 6 points or .27%. This resulted in a weekly loss of -1.3%.
Below is the current open position status:
SPX Weekly Iron Condor
This weekly position was entered Friday; position details below:
- SOLD SPX August 2 2120 Call, .75 Credit.
- BOUGHT SPX August 2 2130 Call, .35 Debit.
- SOLD SPX August 2 2040 Put, 4.00 Credit.
- BOUGHT SPX August 2 2030 Put, 2.80.
Order was filled as an "Iron Condor" for $1.60 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: $840.
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 August 2 Weekly Iron Condor
As of the close, the debit to exit the position is $1.40, so the position is +$20.
Our "good to cancel" exit order remains in place to close the position when the debit reaches $1.00, which would be target gain. The position will be closed at target gain, or if the pre-set max loss of 10% is reached.
Below is the 6 month chart showing the short strikes:
SPX 6 month chart
A recap of next week's economic news is below:
8:30 am Productivity and Costs
10:30 am EIA Petroleum Status Report
8:30 am Jobless Claims
8:30 am Retail Sales
8:30 am Import & Export Prices
10:00 am Business Inventories
8:30 am Producer Price Index
9:15 am Industrial Producction
10:00 am Consumer Sentiment
New Trade Entry:
Next week is the planned entry for the SPY Iron Condor for the September 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, the guidelines are below:
- Entry: Approximately 39 days to expiration.
- Wait at least the first hour after open before entering.
- If SPY has moved one standard deviation in either direction, do not enter the trade until SPY settles to less than a one standard deviation move.
- Sell a short strike with a delta in the .15 - .20 range.
- Buy a long strike 5 points away from the short strike.
- Minimum credit (for both sides) should be at least .80, or it is not recommended to enter the position.
- Target gain is 10% of the actual margin/risk. This is calculated by the width of the wings (5 point in this case = $500), less the actual credit received. For a one-contract trade using the minimum credit of $.80, the margin/risk is $420. Target gain in this example is $42.
- Max loss is 15% of the margin, or $63 using this same example.
- This position will be traded as a "no touch"; it will remain open as long as SPY remains between the short strikes, until the garget gain is reached. The position will be exited at either short strike or the pre-set 15% max loss.
Trade updates will be posted as appropriate.
As always, stay keen on your risk management and trade carefully,