The post-election melt-up continues; the market is happy as the Holiday season is upon us.
The broad market continued its march higher Friday, reaching record levels as the holiday-shortened trading week ended. All three major indices posted their third weekly gain in a row. The benchmark index SPX rose 8.61 points to close at 2213.33, +.39%. This close represented a 1.4% gain for the week.
Below is the open position status:
SPX Weekly Iron Condor for December 2 cycle
This position was opened Friday, November 25; details below:
SOLD SPX December 2 2235 Call, 1.75 credit.
BOUGHT SPX December 2 2245 Call, .90 debit.
SOLD SPX December 2 2160 Put, 1.85 credit.
BOUGHT SPX December 2 2150 Put, 1.35 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 $85.
Below is the risk graph of this week's position as of the close Friday:
SPX December 2 Weekly Iron Condor:
The position is currently showing the position is +15; the debit to exit is $1.20. Our order remains in place to exit the position when the debit is $.75 which would be target gain, or the max loss which is 10% of the margin. The position is quite short delta so should benefit from a pullback early next week.
Below is the SPX chart showing the short strikes:
SPX 6 month chart
RUT December Iron Butterfly
This monthly position was entered Tuesday, November 15; details below:
- SOLD RUT December 1290 Call, 28.80 credit.
- BOUGHT RUT December 1340 Call, 8.10 debit.
- SOLD RUT December 1290 Put, 25.10 credit.
- BOUGHT RUT December 1240 Put, 10.20 debit.
Order was filled as an "Iron Condor" for $35.60 net credit (all four legs).
Additional Order to cut Deltas on upside:
BOUGHT RUT December 1380 Call
Order for extra long call was filled for $1.70.
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: $1,610.
Target Gain: 5% of the gross margin ($250/contract)
Max loss: 10% of the gross margin ($500/contract)
On Thursday, November 17, RUT reached the upper adjustment trigger and the position was adjusted as follows:
Upside Adjustment November 17
BOUGHT RUT December 1290 Call, 40.60 debit.
SOLD RUT December 1340 Call, 12.80 credit.
SOLD RUT December 1310 Call, 28.10 credit.
BOUGHT RUT December 1360 Call, 6.80 debit.
Net debit (all four legs): $6.50
On Tuesday, November 22, the position was adjusted to the upside for the second time as follows:
Upside Adjustment #2 November 22
BOUGHT RUT December 1310 Call, 34.35 debit.
SOLD RUT December 1360 Call, 8.90 credit.
SOLD RUT December 1330 Call, 22.20 credit.
BOUGHT RUT December 1380 Call, 4.00 debit.
Net debit (all four legs): $7.25
Below is the risk graph as of the close Friday:
RUT December Iron Condor:
SHORT December 1330 Call
LONG December 1380 Call
SHORT December 1290 Put
LONG December 1240 Put
LONG December 1380 Call bought at trade entry to cut position delta.
The position is now a 40 point wide Iron Condor.
The position is showing a current loss of $(147) as of the close, only 3 points from the upper breakeven at 1350 so we are watching it carefully. Since the position has already been adjusted twice, we may have to exit if RUT continues much beyond the upper breakeven. The extra long 1380 call purchased at the trade entry is keeping us the play for the time being. We purchased the call for $1.70, and it is currently showing a price of $7.10.
RUT rose for the 15th day in a row, the longest stretch since February 1996. The close Friday at 1347.20 represented a gain of 2.3% for the week.
Next week's economic news is highlighted below:
9:00 am ECB President Mario Draghi speaks
7:45 am Fed's Stanley Fischer speaks
8:30 am GDP
9:00 am S & P Case Shiller HPI
9:15 am William Dudley speaks
10:00 am Consumer Confidence
8:00 am Fed's Robert Kaplan speaks
8:15 am ADP Employment Report
8:30 am Fed's Jerome Powell speaks
10:00 am Pending Home Sales
10:30 am EIA Petroleum Status Report
12:35 pm Fed's Loretta Mester speaks
2:00 pm Beige Book
8:00 pm China PMI Manufacturing Index
8:30 am Jobless Claims
8:30 am Fed's Loretta Mester speaks
10:00 am ISM Manufacturing Index
10:00 am Construction Spending
8:30 am Monthly Employment Situation Report
12:30 pm Fed's Daniel Tarullo 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,