Stocks recovered most of their recent losses and the market is presenting the opportunity to add to our gains.
SPY Position Update
Listed below is the status of our SPY Iron Condor trade as of Thursday April 29th. This position has been open for 29 days:
The entire position should be approx. $2,400 in the black after trade adjustments
SPY closed at $120.86
30-day historical volatility and implied volatility have increased but are still near the lower level of their 52-week range
SPY is ABOVE at its current 14-day EMA (see SPY chart down below)
SPY is trading ABOVE its 20-day Bollinger Band SMA, and 50-day simple moving average (see SPY chart)
SPY is still well ABOVE its 200-day simple moving average (see SPY chart)
Relative Strength Indicator (RSI) is bullish (See SPY chart)
Moving Average Convergence/Divergence (MACD) is neutral (See SPY chart)
The April 27th Couch Potato recommended closing out the entire call spread for an approx. $200 loss (see tables below)
We are opening another May option expiration month call spread (see table below)
SPY Bull Put Spread
We are immediately closing out the initial put spread for an approx. $880 profit and rolling it to higher strike prices (see tables below)
SPY Risk Analysis
The April 27th Couch Potato SPY Risk Analysis section mentioned "... with three weeks until May option expiration we may be able to open another call spread with a more favorable risk profile..." The recent two-day price recovery presented the opportunity to open another call spread AND roll-up the put spread.
Stock prices have regained most of their recent losses and the most probable path is to continue grinding upward. If the market resumes its climb, our $124 strike adjusted short call may be threatened.
The rules for exiting the SPY credit spreads are:
Anytime the market maker is willing to accept a limit price of less than .06 on one of our short strikes, buy back all the short contracts and sell the long positions on the same spread.
If one of our short strikes is penetrated (closing price above our short call or below the short put) AND after market close, if the delta associated with one of the short strikes is .65 or higher, we will look to close out this spread (buy the short contracts, sell the long) and roll it out to another short strike price.
Exiting these spreads prior to expiration we will probably â€œleg outâ€ of the trade by first unwinding either the bear call spread or the bull put spread; and close out the other side of the spread as a separate order. The timing of closing out each side of the both Iron Condors is dependent on following our Exit Rules described above.
The April 27th Couch Potato Final Comment suggested "... depending on how the market plays out over the next several days we may be able to do another call spread (with a more favorable risk profile). For our trading strategy, we can make money managing risk, no need to get greedy..." Discipline may reward us again, as mentioned above, we are adjusting both our call and put spreads to generate more premium.
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.