Will the Fed raise interest rates as early as June?

Friday's choppy session ended the trading week with a mild selloff towards the close. This was likely caused by Fed Chairman Yellen's comments that she expects the central bank to raise interest rates "sometime this year"; which could be as early as June.

Below is the current open position status:

SPX Weekly Iron Condor

This May 5 weekly position was opened Friday; trade details are:

- SOLD SPX May 5 2155 Call, $.95 Credit.

- BOUGHT SPX May 5 2165 Call $.40 Debit.

- SOLD SPX May 5 2090 Put, $1.85 Credit.

- BOUGHT SPX May 5 2080, $1.15 Debit.

Order was filled as an "Iron Condor" for $1.25 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: $875.

Target Gain: 7% of margin/risk or $61.

Max loss: 10% of margin/risk or $87.

The risk graph showing the position as of the close is below:

SPX May 5 Weekly Iron Condor

SPX closed Friday at 2126, down 4.75 points from the previous day and posted a tiny gain for the week of 0.2%.

As of the close, the position is currently +$25. Our exit order remains in place to close the position when the debit reaches $.60, which would be target gain. The position will be closed at target gain, or if the pre-set max loss of 10% is reached. The position is nicely centered for the long weekend, and could reach target as early as Tuesday "if" the open is mild.

Below is the 6 month chart showing the short strikes:

SPX 6 month chart

RUT June Iron Butterfly

This monthly position for the June expiration (Option Code RUT150619) was opened May 18. Position details below.

- SOLD RUT June 1250 Call, 17.50 credit.

- BOUGHT RUT June 1300 Call, 1.65 debit.

- SOLD RUT June 1250 Put, 24.12 credit.

- BOUGHT June 1200 Put, 8.50 debit.

Order was filled as an "Iron Condor" for $31.47 net credit (all four legs).

Additional Order to cut Deltas on upside:

BOUGHT RUT June 1310 Call

Order for extra long call was filled for $1.25.

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: $1,978.

Target Gain: 5% of the gross margin ($250/contract)

Max loss: 10% of the gross margin ($500/contract)

Below is the risk graph of this week's position as shown on my broker's platform:

RUT June Iron Butterfly:

RUT closed Friday at 1252, down 4.5 points or .36%. The position is currently +$169, and also nicely centered close to the center strike.

The adjustment trigger points for this position are if RUT moves up or down 10 points from the center of the Iron Butterfly. Adjustment trigger on the call side would be if RUT reaches 1260. Since we have the extra long call and the position was entered when RUT was at 1248, we can be a little patient with the adjustment depending on the position status and overall market conditions. The downside adjustment would be at approximately 1240, depending on market conditions and position status at the time the trigger is reached. As the trade is also a bit more "friendly" on downside moves, we can be patient as well on making the downside adjustment if the trigger is reached. Remember these are guidelines, not concrete rules, and can be modified as a trader chooses depending on market opinion.

A recap of next week's economic news is below:


US Memorial Day Holiday, Markets Closed


8:30 am Durable Goods Orders

9:00 am S & P Case Shiller Home Price Index

10:00 am New Home Sales

10:00 am Consumer Confidence

10:30 am Dallas Fed Manufacturing Survey


8:30 am Jobless Claims

10:00 am Pending Home Sales Index

11:00 am EIA Petroleum Status Report


8:30 am GDP

9:45 am Chicago PMI

10:00 am Consumer Sentiment

Trade updates will be posted as appropriate.

As always, stay keen on your risk management and trade carefully,

Dot Hazlin