Are the bulls giving up? It sure looked that way Friday, but we'll see what next week brings.
Friday opened positive after a strong retail sales report, but things turned negative pretty quickly. All the main indices closed lower; the benchmark index SPX dropped 17.62 points to close at 2046.61, or -.9%. Despite this being the lowest close since April 11, SPX is holding onto a slight gain of +.1% for the year. Investors continue to be jittery about the Fed raising rates sooner rather than later, and viewed Friday's strong economic report as "bad" news in that regard.
Below is the open position status:
SPX Weekly Iron Condor
This May 20 weekly position was opened Friday; trade details are:
SOLD SPX May 20 2105 Call, 1.05 credit.
BOUGHT SPX May 20 2115 Call, .55 debit.
SOLD SPX May 20 2010 Put, 2.20 credit.
BOUGHT SPX May 20 2000 Put, 1.35 debit.
Order was filled as an "Iron Condor" for $1.35 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: $865.
Target Gain: 7% of margin/risk or $60.
Max loss: 10% of margin/risk or $86.
The risk graph showing the position as of the close is below:
SPX May 20 Weekly Iron Condor
As of the close, the position is at breakeven. Our order remains in place to exit the position for target gain which would be for a debit of $.75, or the max loss of 10%. The position is slightly positive delta, so should benefit if we get a rally early next week. It is recommended to exit the position before the FOMC minutes are released Wednesday afternoon. While there should not be any surprises, this sometimes can create volatility that could 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 June Iron Condor
This monthly position was opened on Monday, May 9. Position details are below:
- SOLD SPY June 214 Call, .48 credit.
- BOUGHT SPY June 219 Call, .10 debit.
- SOLD SPY June 194 Put, 1.10 credit.
- BOUGHT SPY June 189 Put, .64 debit.
Order was filled as an "Iron Condor" for $.84 net credit (all four legs) .
Margin/Risk is calculated by the width of the wings ($500), less credit received.
Margin/Risk for this trade: $416.
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 June Iron Condor:
SPY closed Friday at 204.75; and the position is showing +$18 as of the close. We will continue to let the position work as per the guidelines, which are outlined below.
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 Empire State Manufacturing Index
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 Minutes
8:30 am Jobless Claims
8:30 am Philadelphia Fed Business Outlook Survey
10:00 am Existing Home Sales
Next week is the planned entry for the RUT June monthly Iron Butterfly. Monday will be 32 days to expiration, so we will look to enter the position sometime next week depending on overall market conditions and available credit.
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,