U.S. stocks sold off on Friday as a combination of intensifying Greek default fears and new stock-market regulation from China made investors jittery.
The broad market suffered the worst one-day point decline in more than three weeks, and ended the week with losses after two consecutive weekly gains. SPX dropped to close down 24 points or 1.14%, and RUT dipped to close down 21 points, or 1.65%.
We only have one open position on this weekend. The May SPY Iron Condor was closed for target yesterday, and Friday was a "no entry" day for the weekly SPX Iron Condor because the price action was outside the guidelines for trade entry.
RUT May Iron Butterfly (now Iron Condor)
This monthly position was opened Tuesday, April 14. Position details and status are below:
- SOLD RUT May 1260 Calls, 22.80.
- BOUGHT RUT May 1310 Calls, 2.90
- SOLD RUT May 1260 Puts, 21.55
- BOUGHT May 1210 Puts, 8.50
Order was filled as an "Iron Condor" for $32.95 net credit (all four legs).
Additional Order to Cut Negative Deltas on Upside:
- BOUGHT RUT May 1320 Call
Order for extra long call was filled for $2.10.
Margin/Risk is calculated by the width of the wings ($5,000), less credit received, plus the cost of the extra long call.
Margin/Risk for this trade: $1,915.
Target Gain: 5% of the gross margin ($250/contract)
Max loss: 10% of the gross margin ($500/contract)
RUT reached the first upside adjustment the following day, and was adjusted as per the guidelines on April 15:
Upside Adjustment April 15:
BOUGHT RUT May 1260 Call, 28.90 debit.
SOLD RUT May 1310 Call, 4.50 credit.
SOLD RUT May 1280 Call, 16.40 credit.
BOUGHT May 1330 Call, 1.25 debit.
Net debit (all four legs): $9.25
On Friday, RUT reached the downside adjustment trigger of 1250. Adjustment details:
Downside Adjustment April 17:
BOUGHT RUT May 1260 Put, 26.45 debit.
SOLD RUT May 1210 Put, 9.90 credit.
SOLD RUT May 1240 Put, 18.10 credit.
BOUGHT May 1190 Put, 6.40 debit.
Net debit (all four legs): $4.85
The position is now a 40 point wide Iron Condor, with short call strike at 1280, and the short put strike at 1240.
A graph of the current position as of the close Friday is below:
RUT May Iron Condor:
RUT closed at 1252, the position is currently +$40. The next adjustment trigger points are if RUT reaches either short strike. Because this position has already been adjusted twice, we will evaluate whether to adjust for the third time, or exit the position if the short strikes are hit. Sometimes after multiple adjustments, it is best to exit the position and move on; but we will make that definitive plan when necessary.
The 6 month chart showing the short strikes is below:
RUT 6 month chart:
Next week is a very light week for economic news; a recap is below:
10:00 am Existing Home Sales
10:30 am EIA Petroleum Status Report
8:30 am Jobless Claims
9:45 am PMI Manufacturing Index
10:00 am New Home Sales
8:30 am Durable Goods Orders
Trade updates will be posted as appropriate.
As always, stay keen on your risk management and trade carefully,