A mellow end to the trading week as indecision continues to reign on market direction.
Friday was a quiet day overall, and the broad market closed slightly lower. Despite the weak close to the week, the broad market did post weekly gains. The benchmark index SPX closed down 2.05 points at 2080.73, as investors continue to struggle with market direction.
Below is the open position status:
SPX Weekly Iron Condor
This April 4 weekly position was opened Friday; trade details are:
SOLD SPX April 4 2110 Call, 2.15 credit.
BOUGHT SPX April 4 2120 Call, 1.05 debit.
SOLD SPX April 4 2020 Put, 1.50 credit.
BOUGHT SPX April 4 2010 Put, 1.15 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 4 Weekly Iron Condor
As of the close, the debit to exit is showing a mid price of $1.25, so the position is +$20. Our order remains in place to exit for target gain, or max loss. The position is slightly negative delta and should benefit from a slight pullback early next week.
Below is the 6 month chart showing the short strikes:
SPX 6 month chart
SPY May Iron Condor
This monthly position was opened on April 11; position details are below:
- SOLD SPY May 213 Call, .55 credit.
- BOUGHT SPY May 218 Call, .06 debit.
- SOLD SPY May 193 Put, .93 credit.
- BOUGHT SPY 188 Put, .56 debit.
Order was filled as an "Iron Condor" for $.86 net credit (all four legs) .
Margin/Risk is calculated by the width of the wings ($500), less credit received.
Margin/Risk for this trade: $414.
Target Gain: 10% of margin/risk.
Max loss: 15% of margin/risk.
Below is the risk graph of the position as of the close Friday:
SPY May Iron Condor:
The position is currently a bit above breakeven, and weathered the first week fairly well.
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.
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 currently showing a $74 gain. We will let the position sit without any further adjustments; we have locked in a small gain ($60) at expiration. If we are lucky enough to get a decent pullback, we can perhaps improve on that and exit the position. Otherwise, we will just let it expire. I am planning to enter another position sometime next week depending on market conditions.
Next week's economic news is summarized below:
10:00 am Housing Market Index
8:30 am Housing Starts
10:00 am Existing Home Sales
10:30 am EIA Petroleum Status Report
8:30 am Jobless Claims
8:30 am Philadelphia Fed Business Outlook Survey
9:45 am PMI Manufacturing Index Flash
Next week is the planned entry for the RUT May monthly Iron Butterfly. Monday will be 32 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,