The daily "melt-up" comes to a halt Friday as the bulls take a break, at least for the time being.
The broad market ended slightly lower Friday, as indices retreated from record levels. The benchmark index SPX closed down .24%, down 5.22 points at 2181.90. SPX posted a gain for the week of .8%.
Below is the open position status:
SPX Weekly Iron Condor for November 25 cycle
This position was opened Friday, November 18; details below:
SOLD SPX November 25 2210 Call, 1.50 credit.
BOUGHT SPX November 25 2220 Call, .75 debit.
SOLD SPX November 25 2150 Put, 1.45 credit.
BOUGHT SPX November 25 2140 Put, .95 debit.
Order was filled as an "Iron Condor" for $1.25 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: $875.
Target Gain: 7% of margin/risk or $60.
Max loss: 10% of margin/risk or $85.
Below is the risk graph of this week's position as of the close Friday:
SPX November 25 Weekly Iron Condor:
The position is currently showing we are at target gain of $60, but our limit order did not fill. My orders remain in place to exit the position if the debit remains at $.65 which would be target gain, or the max loss which is 10% of the margin. Having said that, I do recommend exiting the position regardless of the status before the release of the FOMC minute Wednesday afternoon. While there is not expected to be any surprises with the news, it sometimes creates market volatility that could go against the position with little time to recover.
Below is the SPX chart showing the short strikes:
SPX 6 month chart
SPY Monthly Iron Condor for December
This position was opened on Wednesday, November. Details below:
- SOLD SPY December 222 Call, .48 credit.
- BOUGHT SPY December 227 Call, .13 debit.
- SOLD SPY December 201 Put, 1.29 credit.
- BOUGHT SPY December 196 Put, .82 debit.
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 the position as of the close Friday:
SPY December Iron Condor:
The position is slightly under water with a loss of -$9, and will benefit from a pullback. We will watch it carefully and exit if the rally causes the position to reach the max loss of 15% of the margin, or $-62.
Below is the SPY chart showing the short strikes:
SPY 6 month chart
RUT December Iron Butterfly
This monthly position was entered Tuesday, November 15; details below:
- SOLD RUT December 1290 Call, 28.80 credit.
- BOUGHT RUT December 1340 Call, 8.10 debit.
- SOLD RUT December 1290 Put, 25.10 credit.
- BOUGHT RUT December 1240 Put, 10.20 debit.
Order was filled as an "Iron Condor" for $35.60 net credit (all four legs).
Additional Order to cut Deltas on upside:
BOUGHT RUT December 1380 Call
Order for extra long call was filled for $1.70.
Margin/Risk is calculated by the width of the wings ($5,000), less credit received, plus the cost of the extra long call.
Margin for this trade at entry: $1,610.
Target Gain: 5% of the gross margin ($250/contract)
Max loss: 10% of the gross margin ($500/contract)
On Thursday, November 17, RUT reached the upper adjustment trigger and the position was adjusted as follows:
Upside Adjustment November 17
BOUGHT RUT December 1290 Call, 40.60 debit.
SOLD RUT December 1340 Call, 12.80 credit.
SOLD RUT December 1310 Call, 28.10 credit.
BOUGHT RUT December 1360 Call, 6.80 debit.
Net debit (all four legs): $6.50
Below is the risk graph as of the close Friday:
RUT December Iron Condor:
The position summary after the adjustment is as follows:
SHORT December 1310 Call
LONG December 1360 Call
SHORT December 1290 Put
LONG December 1240 Put
LONG December 1380 Call bought at trade entry to cut position delta.
The position is now a 20 point wide Iron Condor.
The position is showing a current loss of $(81) as of the close, and is quite short delta so will benefit from a pullback.
The next adjustment trigger point as per the guidelines is at either short strike, depending on overall position status and market conditions. However, since the upper expiration breakeven is at 1337 and we have the extra long call, I will monitor the position and consider a second upside adjustment if RUT continues higher to the 1320-1325 range.
Next week's economic news is highlighted below:
11:00 am ECB President Mario Draghi speaks
10:00 am Existing Home Sales
8:30 am Durable Goods Orders
8:30 am Jobless Claims
9:45 am PMI Manufacturing Index
2:00 pm FOMC Minutes
Markets Closed; US Thanksgiving Holiday
8:30 am International Trade-in Goods
1:00 pm Markets Close Early
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,