The multi-day tumble continued Friday, markets closed sharply down for the week.
The most pressing concerns for investors over the past week were European economy, weak economic data from China and the prospect of a Federal Reserve interest-rate hike in December. Lackluster retail sales added to the woes on Friday. SPX closed down 22.9 points at 2023, a drop of 1.12%. This represented the largest weekly loss since September 4; the benchmark index fell3.6% for the week.
Below is the current open position status:
SPX Weekly Iron Condor
This November weekly position was opened Friday; trade details are:
SOLD SPX November 2090 Call, 1.50 credit.
BOUGHT SPX November 2100 Call, .80 debit.
SOLD SPX November 1965 Put, 4.70 credit.
BOUGHT SPX November 1955 Put, 3.90 debit.
Order was filled as an "Iron Condor" for $1.50 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: $850.
Target Gain: 7% of margin/risk or $60.
Max loss: 10% of margin/risk or $85.
The risk graph showing the position as of the close is below:
SPX November Weekly Iron Condor
As of the close Friday, the position is at a slight gain of $15, the debit to close is currently $1.35. The position is fairly flat delta and centered. Our OCO "good to cancel" order remains in place to exit the position for target gain or max loss. It is, however, recommended to exit the position regardless before the release of the FOMC minutes on Wednesday. While there should not be any surprises, this can sometimes create volatility that may go against the position with only one day to recover.
Below is the 6 month chart showing the short strikes:
SPX 6 month chart
SPY December Iron Condor
This monthly position was opened on Monday, November 9. Trade details are below:
- SOLD SPY December 217 Call, .48.
- BOUGHT SPY December 222 Call, .11.
- SOLD SPY December 196 Put, 1.17.
- BOUGHT SPY December 191 Put, $.72.
Order was filled as an "Iron Condor" for $.82 net credit (all four legs) .
Margin/Risk is calculated by the width of the wings ($500), less credit received.
Margin/Risk for this trade: $418.
Target Gain: 10% of margin/risk.
Max loss: 15% of margin/risk.
Below is the risk graph of this position as shown on my broker's platform:
SPY December Iron Condor:
SPY closed Friday at 202.54, down 2.3 points. The position is down ($26), and will benefit from a rally.
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. It is recommended to have a "good to cancel" conditional order in to exit the position for target gain or max loss. Please follow your broker's specific guidelines on the setup of conditional orders as they can vary by broker.
Next week's economic news is summarized below:
8:30 am Consumer Price Index
9:15 am Industrial Production
10:00 am Housing Market Index
8:30 am Housing Starts
10:30 am EIA Petroleum Status Report
2:00 pm FOMC Minutes
8:30 am Jobless Claims
10:00 am Philadelphia Fed Business Outlook
Next week is the planned entry for the RUT Iron Butterfly for the December monthly cycle. Monday will be 32 days prior to expiration, so we will look to enter this position sometime next week depending on market conditions and available credit.
For those unfamiliar with the strategy, the trade management guidelines for all the Couch Potato Trader plays were most recently published on August 20, 2015, and can be found here:
Link to Articles
Trade updates will be posted as appropriate.
As always, stay keen on your risk management and trade carefully,