Snap-back rally to end the week brought the biggest one-day gains in 3 months.
Investors took a strong U.S. jobs report as a further indication that the Federal Reserve is more than likely to raise interest rates later this month. Meanwhile, comments from European Central Bank President Mario Draghi also helped lift markets.
SPX gained 41.97 points, or 2.05%, to close at 2091.60. Despite the huge gain on Friday, the benchmark index ended flat for the week.
We were stopped out of the SPX weekly Iron Condor yesterday, just a few hours after entering. While I anticipated a bounce after Thursday's decline and recommended selling a lower call delta, I did not expect the parabolic 2% move in one day. However, as per the guidelines and our trade plan, the position was exited at the pre-set max loss of 10%.
The SPX chart is shown below; Friday's gain more than filled in the selloff on Thursday, so it appears the bulls are back in control
SPX 6 month chart
We have had a good track record for this year on the SPX weekly Iron Condor, with 26 weeks with a gain and 7 losses. The average gain per week, including the losses, is 3.7%. One of our subscribers, George, emailed me yesterday after I posted the closing order for this week's trade, mentioning the anxiety brought on by having to close a trade for a loss on the same day as entry. In looking back at the 7 losing weeks this year, I did find that 5 of the 7 weeks where we were stopped out were either on the same day as entry, or due to a gap on the following Monday morning. While the trade is resilient in most cases, it's difficult for any non-directional trade to survive a big move without having time to gain some theta, which is what we have seen on the losing weeks this year.
We will continue to trade the weekly SPX Iron Condor as per the trade guidelines, and look forward to the next trade entry.
A recap of next week's economic news is below:
10:30 am EIA Petroleum Status Report
8:30 am Jobless Claims
8:30 am Import/Export Prices
8:30 am Producer Price Index
8:30 am Retail Sales
10:00 am Business Inventories
10:00 am Consumer Sentiment
New Trade Entry:
Next week is the planned entry for the SPY Iron Condor for the January 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 for all the Couch Potato Trader plays were most recently published 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,