Another quiet end to the trading week; all eyes look to the FOMC meeting next week.
Friday was a quiet day for the most part, with broad indexes closing flat with the exception of RUT. The benchmark index SPX closed flat at 2091.58. SPX has now gained 3% for the year.
Below is the open position status:
SPX Weekly Iron Condor
This April 5 weekly position was opened Friday; trade details are:
SOLD SPX April 5 2130 Call, 1.65 credit.
BOUGHT SPX April 5 2140 Call, .85 debit.
SOLD SPX April 5 2040 Put, 2.20 credit.
BOUGHT SPX April 5 2030 Put, 1.55 debit.
Order was filled as an "Iron Condor" for $1.45 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: $855.
Target Gain: 7% of margin/risk or $60.
Max loss: 10% of margin/risk or $85.
I notice on my platform this morning (Think or Swim) that the option chain now has the actual expiration date rather than showing two April 5 option chains, for the Wednesday and Friday expirations. This has been confusing the last month or so; so I am pleased that they have changed it. Our open position is the April 29 expiration.
The risk graph showing the position as of the close is below:
SPX April 29 Weekly Iron Condor
As of the close, the position is showing a gain of $40. Our order remains in place to exit to exit the position for a debit of $.85 which would represent target gain; the position will also be closed for the pre-set max loss of 10%. The position is well centered going into next week. It is recommended to exit the position regardless prior to the FOMC meeting announcement on Wednesday. Any volatility/price surge in either position as a result of the announcement could have a negative impact on the position with little time to recover.
Below is the 6 month chart showing the short strikes:
SPX 6 month chart
SPY May Iron Condor
This monthly position was opened on April 11; position details are below:
- SOLD SPY May 213 Call, .55 credit.
- BOUGHT SPY May 218 Call, .06 debit.
- SOLD SPY May 193 Put, .93 credit.
- BOUGHT SPY 188 Put, .56 debit.
Order was filled as an "Iron Condor" for $.86 net credit (all four legs) .
Margin/Risk is calculated by the width of the wings ($500), less credit received.
Margin/Risk for this trade: $414.
Target Gain: 10% of margin/risk.
Max loss: 15% of margin/risk.
Below is the risk graph of the position as of the close Friday:
SPY May Iron Condor:
The position is currently a bit above breakeven, quite short delta so should benefit from a pullback.
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.
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.
On Thursday, March 17, with SPX trading at 2034, a small adjustment was made to smooth the upside T +0 line. Adjustment details are below:
- SOLD (2) SPX May 1 1915 Puts, 13.40 credit.
- BOUGHT (2) SPX May 1 1895 Puts 11.10 debit.
- SOLD (2) SPX May 1 1825 Puts, 5.80 credit.
- BOUGHT (2) SPX May 1 1845 Puts, 6.90 debit
The adjustment filled for a net credit (all four legs) of $1.20
The risk graph as of the close Friday is shown below:
SPX May 1 Bearish Butterfly:
The position is currently showing a $65 gain. We will let the position sit without any further adjustments; we have locked in a small gain ($60) at expiration. If we are lucky enough to get a decent pullback, we can perhaps improve on that and exit the position. Otherwise, we will just let it expire. I was planning to enter another position last week, but with the volatility so low the cost of the entry is too expensive. Entry price is very important to this new strategy, so we will wait until the pricing is in line before entering a small live position.
RUT May Iron Butterfly
This monthly position was entered on Monday, April 18. Position details are below:
- SOLD RUT May 1130 Call, 23.30, credit.
- BOUGHT RUT May 1180 Call, 3.60 debit.
- SOLD RUT May 1130 Put, 19.70 credit.
- BOUGHT RUT May 1080 Put, 7.10 debit.
Order was filled as an "Iron Condor" for $32.30 net credit (all four legs).
Additional Order to cut Deltas on upside:
BOUGHT RUT May 1200 Call
Order for extra long call was filled for $1.30.
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: $1,900.
Target Gain: 5% of the gross margin ($250/contract)
Max loss: 10% of the gross margin ($500/contract)
RUT reached the upper adjustment point on Tuesday, April 19, the day after the trade was opened. The adjustment details are below:
Upside Adjustment April 19:
BOUGHT RUT 1130 Call, 30.26 debit.
SOLD RUT May 1180 Call, 5.80 credit.
SOLD RUT May 1150 Call, 17.80 credit.
BOUGHT May 1200 Call, 2.15 debit.
Net debit (all four legs): $8.81
The position summary after the adjustment is as follows:
SHORT May 1150 Call
LONG May 1200 Call
SHORT May 1130 Put
LONG May 1080 Put
LONG May 1200 Call bought at trade entry to cut position delta.
The position is now a 20 point wide Iron Condor.
Below is the risk graph as of the close Friday:
RUT May Iron Condor:
RUT closed up 10.92 points on Friday to close at 1146.69, just a few points short of the short call strike. If RUT reaches 1150, it may be necessary to adjust the position again to the upside, depending on overall position status and market conditions.
Next week's economic news is summarized below:
10:00 am New Home Sales
10:30 am Dallas Fed Manufacturing Survey
FOMC Meeting Begins
8:30 am Durable Goods Orders
9:00 am S & P Case Shiller HPI
10:00 am Consumer Confidence
8:30 am International Trade
10:00 am Pending Home Sales
10:30 am EIA Petroleum Status Report
2:00 pm FOMC Meeting Announcement
8:30 am GDP
8:30 am Jobless Claims
8:30 am Personal Income & Outlays
8:30 am Employment Cost Report
9:45 am Chicago PMI
10:00 am Consumer Sentiment
For those unfamiliar with the strategies we trade, 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,