Friday's close was the highest so far in 2016, thanks to rebound in oil prices and post-ECB euphoria.

The broad market surged higher yesterday, recording the fourth weekly gain in a row. The benchmark index SPX rose 32.62 points to close at 2022.19, a 1.64% gain. This represented a 1.1% gain for the week. Analysts say the rally could continue into next week; but the fly in the ointment could be the FOMC meeting announcement mid-week.

Below is a summary of our open positions:

SPX Weekly Iron Condor

We did not recommend a new trade entry for the March cycle. With so much intra-day volatility this week, I felt it was best to keep cash as our position rather than risk a short term trade entry going into the FOMC meeting and announcement next week. To quote Jim Brown a week or so ago: "It is better to be bored than broke."

Below is the SPX chart::

SPX 6 month chart

With the sharp rise in the broad market, the "fear" index VIX dropped significantly. The volatility index closed at 16.50, down 8.59% and is now significantly under the historical average of 20.

VIX 6 month chart

SPY April Iron Condor

This monthly position was opened on Monday, March 7. Position details below:

- SOLD SPY April 208 Call, .57 Credit.

- BOUGHT SPY April 213 Call, .09 Debit.

- SOLD SPY April 185 Put, .98 Credit.

- BOUGHT SPY April 180 Put, .59 Debit.

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 position as of the close Friday:

SPY April Iron Condor:

SPY closed Friday at 202.76. The position is slightly below breakeven and very short delta, so it will benefit if the market pulls back.

Below is the SPY chart showing the short strikes:

SPY 6 month chart

Trade Management:

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.

New Test Kitchen Trade; SPX Bearish Butterfly

This new trade was entered in Paper Money Wednesday, February 24. Position details are below:

- BOUGHT 3 SPX May 1 1915 Put, 73.40 debit..

- SOLD 6 SPX May 1 1875 Put, 58.10 credit.

- BOUGHT 3 SPX May 1 1825 Put, 43.40 debit.

Order was filled as a "Butterfly" for $.60 net debit(all three legs) per butterfly.

Margin/Risk is calculated at $1,000 per unit, plus the cost of the butterfly,

Margin/Risk for this trade: $3,180.

Target Gain: $500 for the 3-unit position

Max loss: $750 for the 3-unit position

As stated in the guidelines published February 17, the target gain and max loss may be modified depending on length of time in the trade, etc. Since this is a new trade being incorporated into the plan, we will evaluate progress as time goes on. Below is the risk graph of this position as of the close Friday:

SPX May 1 Bearish Butterfly:

The position is flat delta, which is expected, and a little above breakeven. We will continue to let it work as per the guidelines. While the position would welcome a pullback, there is no need to take any action until SPX advances to 1945, 30 points beyond the upper long strike.

Trade updates will be posted as appropriate.

Next week's economic news is highlighted by the FOMC meeting and subsequent announcement on Wednesday. A summary is below:


FOMC Meeting Begins

8:30 am Producer Price Index

8:30 am Retail Sales

8:30 am Empire State Manufacturing Index

10:00 am Business Inventories

10:00 am Housing Market Index


8:30 am Consumer Price Index

8:30 am Housing Starts

9:15 am Industrial Production

10:30 am EIA Petroleum Status Report

2:00 pm FOMC Meeting Announcement

2:30 pm Chair Yellen Press Conference


8:30 am Jobless Claims

8:30 am Philadelphia Fed Business Outlook


Quadruple Witching Expiration

10:00 am Consumer Sentiment

Next week is the planned entry for the RUT Iron Butterfly for the April monthly cycle. Depending on market conditions and available credit, we will possibly look to enter this position later in the week after the FOMC announcement.

For those unfamiliar with the trade, guidelines were last posted on August 20, 2015, and the article can be found at this link: Link to Articles

Updates will be posted as appropriate.

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

Dot Hazlin