Six shopping days until Christmas. Will Santa show up? Time will tell.
To say the week ended on an ugly note is an understatement. The US market sold off sharply on Friday, with the main indexes ending the week lower. The selloff was largely blamed on continued weakness in the oil market as well as volatility due to options-expiration day. Friday marked the simultaneous expiration of individual stock and index futures and options.
Below is the current open position status:
The selloff in SPX took the benchmark index out of entry range for the weekly Iron Condor, so we did not open a new position.
SPY January Iron Condor
This monthly position was opened on Monday, December 7. Trade details are below:
- SOLD SPY January 216 Call, .50 Credit.
- BOUGHT SPY January 221 Call, .10 Debit.
- SOLD SPY January 197 Put, 1.36 Credit.
- BOUGHT SPY January 192 Put, .84 Debit.
Order was filled as an "Iron Condor" for $.92 net credit (all four legs) .
Margin/Risk is calculated by the width of the wings ($500), less credit received.
Margin/Risk for this trade: $408.
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 January Iron Condor:
SPY closed Friday at 200.02, down 3.61 points. Hopefully 200 will hold as support going into next week. The position is currently -($35), so any rally will benefit the play.
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.
RUT January Iron Butterfly
This monthly position was opened on Thursday, December 17. Trade details are below:
- SOLD RUT January 1150 Call, 22.80 credit.
- BOUGHT RUT January 1200 Call, 4.10 debit.
- SOLD RUT January 1150 Put, 24.00 credit.
- BOUGHT RUT January 1100 Put, 9.10 debit.
Order was filled as an "Iron Condor" for $33.60 net credit (all four legs).
Additional Order to cut Deltas on upside:
BOUGHT RUT January1235 Call
Debit for long call: $.95.
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: $1,735.
Target Gain: 5% of the gross margin ($250/contract)
Max loss: 10% of the gross margin ($500/contract)
On Friday, the day after entry, the position was adjusted to the downside as follows:
BOUGHT RUT January 1150 Put, 32.40 debit.
SOLD RUT January 1100 Put, 12.60 credit.
SOLD RUT January 1130 Put, 22.60 credit.
BOUGHT RUT January 1080 1100 Put, 8.40 debit.
Net debit (all four legs): $5.60
The position summary after the adjustment is as follows:
SHORT January 1150 Call
LONG January 1200 Call
SHORT January 1130 Put
LONG January 1080 Put
LONG January 1235 Call
The position is now a 20 point wide Iron Condor, with the extra long call purchased at trade entry.
The next adjustment trigger point as per the guidelines is at either short strike, depending on the position status and overall market conditions at the time the trigger is reached. Since the expiration breakeven on the downside is at 1102, we did not adjust this position again on Friday. Rather, it will be evaluated next week. With any market cooperation we will see a slight rally into the shortened Holiday trading week.
RUT closed Friday at 1121, down 14 points of 1.26%.
Despite the selloff and having to adjust the position already, it is +$200, so there is no emergency to adjust it again yet.
Below is the risk graph as of the close Friday:
RUT January Iron Condor:
Next week's economic news is summarized below:
8:30 am GDP
10:00 am Existing Home Sales
8:30 am Durable Goods Orders
8:30 am Personal Income & Outlays
10:00 am New Home Sales
10:00 am Consumer Sentiment
10:30 am EIA Petroleum Status Report
8:30 am Jobless Claims
1:00 pm Markets Close
For those unfamiliar with the strategies, 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,