Are you tired of riding this see-saw market?
Another turbulent week in the market; but the major indices managed to snap a five-day losing streak and post the largest daily gains this month. The benchmark index SPX rose 35.70 points to close yesterday at 1864.78, a 2% gain. Despite this gain, this past week was the second straight weekly loss, SPX was down .8% for the week.
A summary of our open positions is below:
SPX Weekly Iron Condor
Order executed for this week's position:
- SOLD SPX February 1915 Call, 2.60 Credit.
- BOUGHT SPX February 1925 Call, 1.50 Debit.
- SOLD SPX February 1745 Put, 2.40 Credit.
- BOUGHT SPX February 1735 Put, 2.10 Debit.
Order was filled as an "Iron Condor" for $1.40 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: $860.
Target Gain: 7% of margin/risk or $60.
Max loss: 10% of margin/risk or $86.
Please note that it is recommended to exit this position before the release of the FOMC minutes on Wednesday afternoon. While there should be no surprises, investors will be carefully digesting this news. Any unexpected wording could cause a sharp move against the position with only one day to recover.
Below is the risk graph of this week's position as shown on my broker's platform:
SPX February Weekly Iron Condor:
The position is up slightly, the current debit to close is $1.25. It is quite negative delta so should benefit from a slight pullback as we go into next week.
Below is the SPX chart showing the short strikes:
SPX 6 month chart
SPY March Iron Condor
This position was entered on Tuesday, February 9. Details are below:
- SOLD SPY March 200 Call, .58 Credit.
- BOUGHT SPY March 205 Call, .17 Debit.
- SOLD SPY March 168 Put, 1.54 Credit.
- BOUGHT SPY March 163 Put, 1.00 Debit.
Order was filled as an "Iron Condor" for $.95 net credit (all four legs).
Margin/Risk is calculated by the width of the wings ($500), less credit received.
Margin/Risk for this trade: $405.
Target Gain: 10%of margin/risk.
Max loss: 15% of margin/risk.
Below is the risk graph as of the close Friday:
SPY March Iron Condor
This monthly position is also slightly negative delta, and holding it's own considering the wild market since the position was opened. The position will be closed at target gain of 10%, or if SPY reaches either short strike.
Below is the SPY chart showing the short strikes:
SPY 6 month chart
New Trade Coming Soon
I have been testing a new trade, which is a longer-term position on SPX. Basically, it is a bearish butterfly entered 65 - 75 days prior to expiration. I feel it is a very viable trade for the Couch Potato Trader newsletter, and will be incorporating it into the trade plan soon. Next week I will publish the guidelines that I have been working with, so stay tuned!
Next week's economic news is summarized below:
Markets closed for U.S. President's Day Holiday
8:30 am Empire State Manufacturing Survey
10:00 am Housing Market Index
8:30 am Housing Starts
8:30 am Producer Price Index
9:15 am Industrial Production
2:00 pm FOMC Minutes
8:30 am Jobless Claims
8:30 am Philadelphia Fed Business Outlook Survey
8:30 am Consumer Price Index
Next week is the planned entry for the RUT Iron Butterfly for the March monthly cycle. Monday will be 32 days to expiration; so we will evaluate the market conditions and consider entry sometime next week.
Updates will be posted as appropriate.
As always, stay keen on your risk management and trade carefully,