Record high closing again; this is beginning to sound like a broken record.
The broad market continued its march higher Friday to another record closing, after the Senate passed a budget plan for next year. Investors cheered the news, believing this has cleared the path for tax cuts which would help the bullish market stay alive.
The benchmark index SPX closed up +13.11 points, +.51% at 2575.21, the sixth weekly gain.
SPX 6 month chart
Volatility remains at record lows, the VIX closed yesterday at 9.97, -.08 points.
VIX 6 month chart
Below is the open position status:
SPY Monthly Iron Condor for November
This position was opened on Monday October 9; details below:
- SOLD SPY November 259 Call, .67 credit.
- BOUGHT SPY November 264 Call, .13 debit.
- SOLD SPY November 247 Put, 1.00 credit.
- BOUGHT SPY November 242 Put, .65 debit.
Order was filled as an "Iron Condor" for $.89 net credit (all four legs) .
Margin/Risk is calculated by the width of the wings ($500), less credit received.
Margin/Risk for this trade: $411.
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 November Iron Condor:
SPY closed Friday at 257.14, the relentless rally has put the trade under water; it is currently -26, and less than two points from the short strike. With any help from the market, we will get a pullback next week which will help the position.
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 November Iron Butterfly:
This position was opened on Monday, October 16; details below:
- SOLD RUT November 1510 Call, 20.45 credit.
- BOUGHT RUT November 1560 Call, 3.45 debit.
- SOLD RUT November 1510 Put, 23.00 credit.
- BOUGHT RUT November 1460 Put. 9.20 debit.
Order was filled as an "Iron Condor" for $30.80 net credit (all four legs).
Additional Order to cut Deltas on upside:
BOUGHT RUT November 1590 Call
Order for extra long call was filled for $1.10.
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: $2,030.
Target Gain: 5% of the gross margin ($250/contract)
Max loss: 10% of the gross margin ($500/contract)
Below is the risk graph as of the close:
RUT November Iron Butterfly:
Think or Swim is showing the position is + $223, very close to target if the after-hours pricing is correct. RUT closed Friday up +7.30 points at 1509.25, so the position is nicely centered at the short strike. If the pricing is accurate and we have a quiet open, we could reach target on this trade Monday.
The adjustment trigger points for this position are if RUT moves up or down 10 points from the center of the Iron Butterfly. Adjustment trigger on the call side would be if RUT reaches 1520. Since we have the extra long call, we can be a little patient with the adjustment depending on the position status and overall market conditions. The downside adjustment would be at approximately 1500, depending on market conditions and position status at the time the trigger is reached. As the trade is also a bit more "friendly" on downside moves, we can be patient as well on making the downside adjustment if the trigger is reached. Remember these are guidelines, not concrete rules, and can be modified as a trader chooses depending on market opinion.
New "Test Kitchen" RUT Put Credit Spread for December 15
This new trade we are testing was opened Tuesday, October 10; details below:
SOLD RUT December 15 1400 Put, 9.80 credit.
BOUGHT RUT December 15 1370 Put, 7.20 debit.
Order was filled as an "Iron Condor" for $2.65 net credit (all four legs).
Margin/Risk is calculated by the width of the wings ($3,000), less credit received.
Margin/Risk for this week's trade: $2,735.
Think or Swim is currently showing the position +$78, so performing well so far. We will likely add this play to the regular portfolio with the next entry in November.
Below is the risk graph of this week's position as of the close:
RUT December 15 Put Credit Spread:
Below is the RUT chart showing the short strike:
RUT 6 month chart
The trade is left in play to work until:
1) If the loss reaches $250, the position is closed.
2) When the next monthly cycle is at the 65 days to expiration window, the position is closed, which would be approximately November 14.
Next week's economic news, is summarized below:
Monday, October 23
9:45 am PMI Composite Flash
8:30 am Durable Goods Orders
10:00 am New Home Sales
10:30 am EIA Petroleum Status Report
8:30 am International Tradein Goods
8:30 am Jobless Claims
10:00 am Pending Home Sales Index
10:30 am Fed's Neel Kashkari speaks
8:30 am GDP
10:00 am Consumer Sentiment
For those unfamiliar with the strategies we trade, the trade management guidelines for all the Couch Potato Trader plays 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,