A mellow end to the trading week as indecision reigns on market direction.
Friday was a quiet day overall, and the broad market closed up marginally higher. Despite the gain, however, the close represented the worst weekly loss since early February. The benchmark index SPX closed up 5.69 points at 2047.60, up .28%. The weekly loss for SPX was -1.27% as investors struggle with market direction.
Below is the open position status:
SPX Weekly Iron Condor
This April weekly position was opened Friday; trade details are:
SOLD SPX April 2095 Call, 1.45 credit.
BOUGHT SPX April 2105 Call, .65 debit.
SOLD SPX April 2000 Put, 1.70 credit.
BOUGHT SPX April 1990 Put, 1.05 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 April Weekly Iron Condor
After-hours pricing is showing the position is at target gain; with the debit to close at $.85. However, especially since this is the monthly cycle, bid/ask prices can be wider than normal and I'm not sure that $.85 is a realistic figure. Our good-to-cancel order remains in place to exit for target gain, so we will see what Monday brings. As outlined in the guidelines, the position will also be exited at the pre-set max loss of 10%. The position is fairly well centered going into next week.
Below is the 6 month chart showing the short strikes:
SPX 6 month chart
New Test Kitchen Trade; SPX Bearish Butterfly
This new trade was entered in Paper Money Wednesday, February 24. Position details are below:
- BOUGHT 3 SPX May 1 1915 Put, 73.40 debit.
- SOLD 6 SPX May 1 1875 Put, 58.10 credit.
- BOUGHT 3 SPX May 1 1825 Put, 43.40 debit.
Order was filled as a "Butterfly" for $.60 net debit(all three legs) per butterfly.
Margin/Risk is calculated at $1,000 per unit, plus the cost of the butterfly,
Margin/Risk for this trade: $3,180.
Target Gain: $500 for the 3-unit position
Max loss: $750 for the 3-unit position
As stated in the guidelines published February 17, the target gain and max loss may be modified depending on length of time in the trade, etc. Since this is a new trade being incorporated into the plan, we will evaluate progress as time goes on.
On Thursday, March 17, with SPX trading at 2034, a small adjustment was made to smooth the upside T +0 line. Adjustment details are below:
- SOLD (2) SPX May 1 1915 Puts, 13.40 credit.
- BOUGHT (2) SPX May 1 1895 Puts 11.10 debit.
- SOLD (2) SPX May 1 1825 Puts, 5.80 credit.
- BOUGHT (2) SPX May 1 1845 Puts, 6.90 debit
The adjustment filled for a net credit (all four legs) of $1.20
The risk graph as of the close Friday is shown below:
SPX May 1 Bearish Butterfly:
The position is flat delta, which is expected, and currently at a $142 gain. We will continue to let it work as per the guidelines. Unless there is a significant pullback next week, we will most likely roll the third contract similarly to the first two.
Next week's economic news is summarized below:
8:30 am Import & Export Prices
8:30 am Producer Price Index
8:30 am Retail Sales
10:00 am Business Inventories
10:30 am EIA Petroleum Status Report
2:00 pm Beige Book
8:30 am Jobless Claims
8:30 am Consumer Price Index
8:30 am Empire State Manufacturing Survey
9:15 am Industrial Production
10:00 am Consumer Sentiment
Next week is the planned entry for the SPY May monthly Iron Condor. Monday will be 39 days to expiration, so we will look to enter the position sometime next week depending on overall market conditions and available credit.
For those unfamiliar with the strategies we trade, 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,