Groups of economist are suggesting that a reported increase in hiring temporary personnel might be the first sign of job recovery. The premise is that tepid labor markets improve after accelerated temporary hiring which precedes improvement in the overall labor market by three to six months. Therefore, based on the August temporary worker report, they don't expect the overall labor market to improve until sometime next year at the earliest.
After past economic downturns, initially worker productivity surges as employers pressure the reduced workforce for more work. Next worker hours have to be increased to keep up with demand and eventually temporary workers have to be added. Businesses prefer not to add permanent workers until they are satisfied that the economy is actually recovering. We need to see if that process has begun!
Listed below is the status of our SPY Iron Condor trade as of Wednesday September 9th. This position has been open for 16 days:
The entire position is $2,780 in the black
SPY closed at $103.73
30-day historical volatility is lower â€“ which bullish, implied volatility is lower
SPY is well ABOVE its 200-day and 50-day simple moving averages (see SPY chart below)
SPY is trading ABOVE its 14-day EMA and 20-day Bollinger Band SMA (see SPY chart down below)
Relative Strength Indicator (RSI) is turning bullish (See Spy chart)
Moving Average Convergence/Divergence (MACD) bearish momentum has stopped and is turning up (See Spy chart below)
Bear Call Spread
We initiated the SPY Iron Condor trade on August 26h and closed out the First Bear Call spread at $980 profit on September 2nd
To recap the most recent Couch Potato commentary " With over three weeks until the expiration date for the September Quarterly option series we will consider opening another SPY Bear Call spread IF we can satisfy our original trade criterion - generate a minimum .50 net credit on the spread between the short and long strikes AND the short strike should fit our statistical probability profile..." Well, today that opportunity presented itself and we recommend re-entering the same Bear Call credit spread, except trade the September Quarterly option series instead of the regular monthly options (see tables below).
Bull Put Spread
Close out The Bull Put Spread at $800 profit (see tables below)
Since we closed out our short $97 strike put, the only risk we have to manage is the $107 strike price from entering another call credit spread. The risk associated with the sold call will be evaluated and resolved based on the Exit Plan.
The market is still in a short-to-medium term uptrend and is still trading within the upper and lower bull channel trend lines. The opportunity to generate more premiums from opening another Bear Call credit spread was discussed in the previous commentary. The market cooperated and since we traded the September Quarterly options series, this position must be monitored until to the end of the month (versus the regular 3rd Friday expiration).
The rules for exiting a Bear Call spread are:
Anytime the market maker is willing to accept a limit price of less than .11 on one of our short strikes, buy back all the short contracts and sell the long positions on the same spread. However, if it is a few days prior to the expiration date, we can hold out for a .05 bid.
If the short call strike price is penetrated (closing price above the short call) AND the delta rises to .65 we will look to close out this spread (buy the short contracts, sell the long) and roll it out to the October option series. Unless this is option expiration week, no need to rush closing the trade, the market might reverse itself and remove the sense of urgency. If the short strike has been violated and there is no price reversal, we cut our losses and live to fight another day.
On the last day of the month, if rules 1 and 2 above have not been activated, let the Bear Call spread expire worthless and we keep the entire sold premium for any open contracts where the short strikes are not threatened.
In the "Bear Call Spread" section above we recommend opening another credit spread by trading the Quarterly Options series. To recap the most recent Couch Potato commentary discussing Quarterly Options - Quarterly options trade exactly like any other standardized exchange traded options except for the fact that they expire on the final trading day of the month and not on the 3rd Friday like regular options. Many traders appreciate the flexibility of having extra days work with compared to regular options.
Couch Potato Trader Disclaimer
All results reported in this section are hypothetical. While the numbers represented here may have been achieved or beaten by our readers, we make no representation that any individual investor achieved these exact results. The tracking for the plays listed in this section uses closing prices for the day the newsletter is published and it is not meant to imply that any reader actually received those prices (though many often do) or participated in these recommendations (even though many do). The portfolio represented here is hypothetical and for investment education purposes only. It is only an illustration of what type of gains a knowledgeable trader might receive utilizing these strategies. If you don't get close to these results, guess what. It isn't the fault of the strategies.