The Fed-induced rally continued into the close of the trading week; indices across the board enjoyed strong weekly gains.
Despite the Fed removing the word "patient" from the text at the conclusion of their meeting, investors reacted positively to the announcement that an interest rate may be likely in June and took the market higher. SPX closed Friday up almost 19 points or .90%, with a gain of 2.7% for the week.
Below is the current open position status:
1) SPX Weekly Iron Condor
This March 4 weekly position was opened Friday; trade details are:
SOLD SPX March 4 2130 Calls, credit $2.10. Delta of short call: .13.
BOUGHT SPX March 4 2140 Calls, debit $.85.
SOLD SPX March 4 2060 Puts, credit 1.60. Delta of short put: -.12.
BOUGHT SPX March 4 2050 Puts, 1.15 debit.
Order was filled as an "Iron Condor" for $1.70 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: $830.
Target Gain: 7% of margin/risk or $58.
Max loss: 10% of margin/risk or $84.
The risk graph showing the position as of the close is below:
SPX March 4 Weekly Iron Condor
With the short call strike at 2130, it is still a bit over 20 points away with a delta of .16 as of the close. With any cooperation from the market, Monday may bring a slight pullback, or at least some consolidation, which will benefit the position. The current debit to close the position is $1.50; our order remains in place with a closing order of $1.10 which would be target gain of $60. The position will be closed if the debit to close reaches $2.55, the pre-set max loss.
One of our readers emailed me last evening with a slightly different approach to this week's position; I will quote his action plan for the benefit of those considering an alternate to putting on both sides of the Iron Condor in one order.
John's approach:" I thought that this week's entry recommendation is fine since with opex, a high into the close today makes sense. With the move up, I just entered a bear spread at 2130/2140 with a mid recommended credit of $1.45. I will wait until Monday for a move down and decide if to complete the condor either at the recommended strikes or slightly lower. Should goose the returns (I hope!) Some others might want to leg into the trade as well as a way to optimize things."
Thank you John for that suggestion; his fill at $1.45 for the call spread was a better credit than the $1.25 that I received.
The SPX chart is below showing the short strikes:
SPX 6 month chart
2) SPY April Iron Condor
This monthly position was opened Monday, March 9; details as follows:
- SOLD SPY April 215 Calls, currently $.48. Delta of short call: .14.
- BOUGHT SPY April 220 Calls, currently $.08.
- SOLD SPY April 197 Puts, currently $1.24. Delta of short put: - .17
- BOUGHT SPY April 192 Puts, currently $.74
Order was filled as an "Iron Condor" for $.90 net credit (all four legs).
Margin/Risk is calculated by the width of the wings ($500), less credit received.
Margin/Risk for this trade: $410.
Target Gain: 10% of margin/risk.
Max loss: 15% of margin/risk.
Below is the risk graph of this new position as of the close Friday:
SPY April Iron Condor:
The position is currently +$27. With SPY closing Friday at 210.41, the position is quite negative-delta so will benefit from any pullback.
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.
3) RUT April Iron Butterfly
This monthly position on RUT was opened Thursday, March 19; details follow:
Order executed for this new position:
- SOLD RUT April 1250 Calls, 20.70.
- BOUGHT RUT April 1300 Calls, 2.60
- SOLD RUT April 1250 Puts, 19.80
- BOUGHT RUT April 1200 Puts, 7.00
Order was filled as an "Iron Condor" for $30.90 net credit (all four legs).
Additional Order to Cut Negative Deltas on Upside:
- BOUGHT RUT April 1310 Call
Order for extra long call was filled for $1.35.
Friday the upside adjustment trigger was hit, and the call spreads were rolled out 20 points as per the guidelines. The adjustment details are:
RUT Upside Adjustment
BOUGHT RUT April 1250 Call, 26.20 debit.
SOLD RUT April 1300 Call, 2.90 credit.
SOLD RUT April 1270 Call, 13.80 credit.
BOUGHT April 1320 Call, .70 debit.
Net debit (all four legs): $10.20
Below is the risk graph of the adjusted position as of the close:
RUT April Iron Condor:
The position is currently a 20 point wide Iron Condor, with short call strikes at 1270, and short puts at the original 1250 strike. It is -$(40) as of the close; also negative delta so will benefit from any pullback. The next adjustment trigger is 1270 on the upside, and 1240 on the downside. If these adjustment triggers are reached, the guidelines call for the threatened side to be rolled out 20 points, depending on position status and overall market conditions.
The RUT 6 month chart is below indicating the short strikes:
RUT 6 month Chart:
RUT closed Friday at 1266.37, slightly below the intra-day all time high of 1267, or up .92% for the day.
For those unfamiliar with the strategy, the trade management guidelines were updated on October 22, 2014, and can be found here:
Link to Articles
Next week brings quite a bit of economic news; a recap is below:
10:00 am Existing Home Sales
8:30 am Consumer Price Index
9:45 am PMI Manufacturing Index
10:00 am New Home Sales
8:30 am Durable Goods Orders
10:30 am EIA Petroleum Status Report
8:30 am Jobless Claims
8:30 am GDP
10:00 am Consumer Sentiment
Position updates will be posted as appropriate.
As always, stay keen on your risk management and trade carefully,