Rate hike fears diminish; the bulls ran the show Friday.
The broad market posted substantial gains Friday after Thursday's selloff. The benchmark index SPX closed up 12.28 points at 2052.32, snapping a 3 week losing streak. The weekly gain after Friday's close was .3%.
Below is the open position status:
SPX Weekly Iron Condor
This May 27 weekly position was opened Friday; trade details are:
SOLD SPX May 27 2095 Call, 1.10 credit.
BOUGHT SPX May 27 2105 Call, .50 debit.
SOLD SPX May 27 2000 Put, 2.65 credit.
BOUGHT SPX May 27 1990 Put, 1.90 debit.
Order was filled as an "Iron Condor" for $1.35 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: $865.
Target Gain: 7% of margin/risk or $60.
Max loss: 10% of margin/risk or $86.
The risk graph showing the position as of the close is below:
SPX May 27 Weekly Iron Condor
As of the close, the position is up nicely at +$45. Our order remains in place to exit the position for target gain which would be for a debit of $.75, or the max loss of 10%. The position is well centered going into next week.
Below is the 6 month chart showing the short strikes:
SPX 6 month chart
SPY June Iron Condor
This monthly position was opened on Monday, May 9. Position details are below:
- SOLD SPY June 214 Call, .48 credit.
- BOUGHT SPY June 219 Call, .10 debit.
- SOLD SPY June 194 Put, 1.10 credit.
- BOUGHT SPY June 189 Put, .64 debit.
Order was filled as an "Iron Condor" for $.84 net credit (all four legs) .
Margin/Risk is calculated by the width of the wings ($500), less credit received.
Margin/Risk for this trade: $416.
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 June Iron Condor:
SPY closed Friday at 205.49; and the position is showing +$17 as of the close. We will continue to let the position work as per the guidelines, which are outlined below.
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 June Iron Butterfly
This monthly position was opened on Monday, May 16. Position details below:
- SOLD RUT June 1110 Call, 24.10, credit.
- BOUGHT RUT June 1160 Call, 4.40 debit.
- SOLD RUT June 1110 Put, 22.00 credit.
- BOUGHT RUT June 1060 Put, 7.90 debit.
Order was filled as an "Iron Condor" for $33.80 net credit (all four legs).
Additional Order to cut Deltas on upside:
BOUGHT RUT June 1180 Call
Order for extra long call was filled for $1.60.
Margin/Risk is calculated by the width of the wings ($5,000), less credit received, plus the cost of the extra long call.
Margin for this trade at entry: 1,780.
Target Gain: 5% of the gross margin ($250/contract)
Max loss: 10% of the gross margin ($500/contract)
On May 19, RUT reached the downside adjustment trigger and the position adjustment was as follows:
BOUGHT RUT June 1110 Put, 34.50 debit.
SOLD RUT June 1060 Put, 13.70 credit.
SOLD RUT June 1090 Put, 24.40 credit.
BOUGHT June 1040 Put, 9.10 debit.
Net debit (all four legs): $5.50
The position summary after the adjustment is as follows:
SHORT RUT June 1110 Call
LONG RUT June 1160 Call
SHORT RUT June 1090 Put
LONG RUT June 1040 Put
Long RUT June 1180 Call to cut deltas at entry
The position is now a 20 point wide Iron Condor.
The next adjustment trigger point as per the guidelines is at either short strike. RUT closed Friday just above the short call strike at 1112, so if the market does not pull back on Monday it may be necessary to adjust to the upside. The position is showing +$35 as of the close Friday.
Below is the risk graph as of the close Friday:
RUT June Iron Condor:
Next week's economic news is summarized below:
9:45 am PMI Manufacturing Index
10:00 am New Home Sales
8:30 am International Trade
10:30 am EIA Petroleum Status Report
8:30 am Durable Goods Orders
8:30 am Jobless Claims
10:00 am Pending Home Sales
8:30 am GDP
10:00 am Consumer Sentiment
10:30 am Fed Chair Janet Yellen speaks
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,