The roller-coaster ride continues as the market searches for direction.
For most of the day Friday it appeared that the broad market would lose it's gain for the month. But a late-day rally off the lows brought the benchmark index SPX up to close at 2065.30, down 10.51 points or -.5%. This represents the second monthly rise in a row.
We exited two positions yesterday; the SPY May Iron Condor closed for target gain, and we had to close the RUT monthly Iron Condor for a 4% loss.
Below is the open position status:
SPX Weekly Iron Condor
This May 6 weekly position was opened Friday; trade details are:
SOLD SPX May 6 2115 Call, 1.05 credit.
BOUGHT SPX May 6 2125 Call, .55 debit.
SOLD SPX May 6 2010 Put, 3.40 credit.
BOUGHT SPX May 6 2000 Put, 2.45 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 May 6 Weekly Iron Condor
As of the close, the position is showing a gain of $35; the current debit to exit is $1.10. Our order remains in place to exit the position for target gain which would be a debit of $.85, or the max loss of 10%. The position is flat delta and nicely 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 6 1915 Put, 73.40 debit..
- SOLD 6 SPX May 6 1875 Put, 58.10 credit.
- BOUGHT 3 SPX May 6 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
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 6 1915 Puts, 13.40 credit.
- BOUGHT (2) SPX May 6 1895 Puts 11.10 debit.
- SOLD (2) SPX May 6 1825 Puts, 5.80 credit.
- BOUGHT (2) SPX May 6 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 6 Bearish Butterfly:
The position is currently at its maximum gain of $60 unless there is a significant pullback, so we will let the position expire next week.
I have been watching prices for a new trade entry, but the butterflies are too expensive to open a new position right now. The trade is designed to get the butterflies for under $1.00 if at all possible; $1.25 is the maximum I feel is appropriate for a decent risk:reward. I am planning to put this new strategy on a back burner for the moment; but will keep my eyes open for pricing that is more in line with the trade setup.
Next week's economic news is summarized below:
9:45 am PMI Manufacturing Index
10:00 am ISM Manufacturing Index
10:00 am Construction Spending
8:15 am ADP Employment Report
8:30 am International Trade
8:30 am Productivity & Costs
8:30 am Jobless Claims
8:30 am Monthly Employment Situation Report
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,