Fed induced rally sends the bears into hibernation.
The FOMC's "magic touch" continues to fuel the bulls rally; indices across the board ended the week with the biggest gains since October.
Open Position Status; RUT January Iron Butterfly.
A summary of the monthly RUT position opened Thursday, December 18:
SOLD RUT January 1180 Call.
BOUGHT RUT January 1230 Call.
SOLD RUT January 1180 Put.
BOUGHT January 1130 Put.
Net Credit (all four legs): $35.15.
BOUGHT RUT January 1260 Call. Debit: $1.70
The trade guidelines call for the position to be adjusted with a 10 point move from the center strike in either direction. Our web site had technical difficulties Friday, so I could not post the adjustment that was made in the afternoon. With RUT at approximately 1193 mid-afternoon, the call spreads were rolled 20 points. The adjustment execution order details are as follows:
BOUGHT RUT January 1180 Call.
SOLD RUT January 1230 Call.
SOLD RUT January 1200 Call.
BOUGHT RUT January 1250 Call.
Net Debit (all four legs): $7.95.
The adjusted position now has the short call strike at 1200. The short put is at the original strike of 1180, so we now have a 20 point wide Iron Condor.
Below is the graph of the adjusted position:
RUT January Iron Condor:
The next adjustment trigger on the upside, as per the guidelines, is at another 10 point move, or 1200. However, since we have the extra long call purchased at trade entry, the T + 0 line is quite flat on the upside, with the upper expiration breakeven at 1225. With the shortened Holiday trading week upon us, the position will be watched carefully, and I will hold off on another upside adjustment until there is a clear break of the 1200 level. Depending on the market and the position status, we may be able to wait to see if the previous all-time closing high of 1208.15 from July holds as resistance before adjusting.
Volume will likely be low next week, and decrease even more as the week progresses. However, we do sometimes see violent moves as a result of so few traders reacting to news, geopolitical events, etc. in a holiday period.
Below is the RUT 6 month chart showing the near-term resistance of 1200:
RUT 6 month chart:
Next week's economic news releases are compressed into the first three trading days; a summary is below:
10:00 am Existing Home Sales
8:30 am Durable Goods Orders
8:30 am GDP report
8:30 am Personal Income & Outlays
9:55 am Consumer Sentiment
10:00 am New Home Sales
8:30 am Jobless Claims
10:30 am EIA Petroleum Status Report
1:00 pm Markets closed
All Markets Closed
Trade updates will be posted as appropriate.
As always, stay keen on your risk management and trade carefully,