Is the Santa Claus rally early this year?
The broad market ended a choppy session slightly higher on Friday, posting a third consecutive week of gains as investors appeared to shrug off lackluster corporate earnings and mixed economic data.
The benchmark index, SPX, switched between small gains and losses, but managed to close higher, rising 9 points, or 0.5%, to 2,033, its highest finish since Aug. 20. This represented a gain of 0.9% for the week.
Below is the current open position status:
SPX Weekly Iron Condor
This October 4 weekly position was opened Friday; trade details are:
SOLD SPX October 4 2060 Call, credit $1.60.
BOUGHT SPX October 4 2070 Call, debit $.70.
SOLD SPX October 4 1970 Put, credit 2.25.
BOUGHT SPX October 4 1960 Put, 1.70 debit.
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 October 4 Weekly Iron Condor
As of the close Friday, the position is at a slight gain of $15. The Iron Condor is quite negative delta, so should benefit from a slight pullback early next week. Our OCO "good to cancel" order remains in place to exit the position for target gain or max loss.
Below is the 6 month chart showing the short strikes:
SPX 6 month chart
SPY November Iron Condor
This monthly position was opened on Wednesday, October 12. Trade details are below:
- SOLD SPY November 210 Call, .56.
- BOUGHT SPY November 215 Call, $.11.
- SOLD SPY November 188 Put, $1.11.
- BOUGHT SPY November 183 Put, $.71
Order was filled as an "Iron Condor" for $.85 net credit (all four legs) .
Margin/Risk is calculated by the width of the wings ($500), less credit received.
Margin/Risk for this trade: $415.
Target Gain: 10% of margin/risk.
Max loss: 15% of margin/risk.
Below is the risk graph of this position as shown on my broker's platform:
SPY November Iron Condor:
SPY closed Friday at 203.36, or +.09%. The position is currently +$19 and also negative delta so a slight pullback should benefit .
Below is the SPY chart showing the short strikes:
SPY 6 month chart
The guidelines call for the position to remain open until target gain is reached, as long as SPY stays between the short strikes. They also call for exiting at the pre-set max loss, or if SPY reaches either short strike. It is recommended to have a "good to cancel" conditional order in to exit the position for target gain or max loss. Please follow your broker's specific guidelines on the setup of conditional orders as they can vary by broker.
Next week's economic news is summarized below:
10:00 am Housing Market Index
8:30 am Housing Starts
10:30 am EIA Petroleum Status Report
8:30 am Jobless Claims
10:00 am Existing Home Sales
9:45 am PMI Manufacturing Index Flash
Next week is the planned entry for the RUT Iron Butterfly for the November monthly cycle. Monday will be 32 days prior to expiration, so we will look to enter this position sometime next week depending on market conditions and available credit.
For those unfamiliar with the strategy, the trade management guidelines for all the Couch Potato Trader plays were most recently published on August 20, 2015, and can be found here:
Link to Articles
Trade updates will be posted as appropriate.
As always, stay keen on your risk management and trade carefully,