Fourth weekly gain for the broad market as China's interest rate cut fuels end-of-week rally.
The broad market rallied into the close Friday; SPX has now turned positive for the year. The benchmark index closed up 22.65 points Friday, +1.1% at 2075.16, representing a gain for the week of 2.1%.
Below is the current open position status:
SPX Weekly Iron Condor
This October 5 weekly position was opened Friday; trade details are:
SOLD SPX October 5 2100 Call, credit $1.90.
BOUGHT SPX October 5 2110 Call, debit $.90.
SOLD SPX October 5 2000 Put, credit $1.90.
BOUGHT SPX October 5 1990 Put, $1.40 debit.
Order was filled as an "Iron Condor" for $1.50 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: $850.
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 5 Weekly Iron Condor
As of the close Friday, the position is slightly under water at (-$10). The position is very negative delta, so will benefit from a pullback early next week. Our OCO "good to cancel" order remains in place to exit the position for target gain or max loss. Having said that, it is recommended to exit the position regardless prior to the FOMC meeting announcement on Wednesday afternoon. This news event usually creates some volatility that could adversely affect the position with little time to recover.
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 of the close Friday:
SPY November Iron Condor:
SPY closed Friday at 207.51, and the position is currently down (-$46). The Iron Condor is very close to being stopped out; our stop limit order remain in place to exit the position if the debit reaches $1.47 (all four legs), which would represent the pre-set max loss of 15%. With any cooperation from the market, we may be able to hang in there with a pullback but will stay with the plan as per the guidelines.
Below is the SPY chart showing the short strikes:
SPY 6 month chart
RUT November Iron Butterfly
This position was opened on Monday, October 19. Trade details below:
- SOLD RUT November 1170 Call, 21.10 credit.
- BOUGHT RUT November 1220 Call, 2.70 debit.
- SOLD RUT November 1170 Put, 23.45 credit.
- BOUGHT November 1120 Put, 9.20 debit.
Order was filled as an "Iron Condor" for $32.65 net credit (all four legs).
Additional Order to cut Deltas on upside:
BOUGHT RUT November 1235 Call
Order for extra long call was filled for $1.05.
Margin/Risk is calculated by the width of the wings ($5,000), less credit received, plus the cost of the extra long call.
Margin/Risk for this trade: $1,840.
Target Gain: 5% of the gross margin ($250/contract)
Max loss: 10% of the gross margin ($500/contract)
On Wednesday, 10/21, RUT reached the downside adjustment trigger point of 1160. The position was adjusted as per the guidelines; adjustment details follow:
BOUGHT RUT November 1170 Put, 31.50 debit.
SOLD RUT November 1120 Put, 12.90 credit.
SOLD RUT November 1150 Put, 22.30 credit.
BOUGHT RUT November 1100 Put, 8.80 debit.
Net debit (all four legs): $5.10
The position summary after the adjustment is as follows:
SHORT November 1170 Call
LONG November 1220 Call
SHORT November 1150 Put
LONG November 1100 Put
The position is now a 20 point wide Iron Condor.
The next adjustment trigger point will be at either short strike, depending on the position status and overall market conditions at the time the trigger is reached.
The risk graph showing the adjusted position as of the close is below:
RUT November Iron Condor
RUT closed Friday +11.53 points at 1166, or +1%. The position as of the close is +$115; the target gain remains at $250 and max loss at $500.
Next week's economic news is summarized below:
10:00 am New Home Sales
10:30 am Dallas Fed Manufacturing Survey
FOMC Meeting Begins
8:30 am Durable Goods Orders
9:00 am S & P Case Shiller HPI
10:00 am Consumer Confidence
10:30 am EIA Petroleum Status Report
2:00 pm FOMC Meeting Announcement
8:30 am GDP
8:30 am Jobless Claims
10:00 am Pending Home Sales
8:30 am Personal Income & Outlays
9:45 am Chicago PMI
10:00 am Consumer Sentiment
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,