The bulls took a little break from the Trump/Santa Claus rally; is the market ready to roll over yet?
The broad market closed slightly lower Friday, following reports that a Chinese warship seized an underwater U.S. Navy drone in international waters off the coast of the Philippines.
The slight move could hardly be called a "sell-off", the benchmark index SPX closed down just 3.96 points at 2258.07.
Below is the open position status:
SPX Weekly Iron Condor for December 23 cycle
This position was opened Friday, December 16; details below:
SOLD SPX December 23 2300 Call, 2.25 credit.
BOUGHT SPX December 23 2310 Call, 1.35 debit.
SOLD SPX December23 2210 Put, 1.80 credit.
BOUGHT SPX December 23 2200 Put, 1.40 debit.
Order was filled as an "Iron Condor" for $1.30 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: $870.
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 December 23 Weekly Iron Condor:
The position is currently showing a gain of +$45; the debit to exit as of the close yesterday is $.85. Our order remains in place to exit the position when the debit is $.70 which would be target gain, or the max loss which is 10% of the margin. The position flat delta and nicely centered going into next week
Below is the SPX chart showing the short strikes:
SPX 6 month chart
SPY Monthly Iron Condor for January
This position was opened Monday, December 12; details below:
- SOLD SPY January 233 Call, .52 credit.
- BOUGHT SPY January 238 Call, .16 debit.
- SOLD SPY January 217 Put, 1.09 credit.
- BOUGHT SPY January 212 Put, .62 debit.
Order was filled as an "Iron Condor" for $.83 net credit (all four legs) .
Margin/Risk is calculated by the width of the wings ($500), less credit received.
Margin/Risk for this trade: $417.
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 January Iron Condor:
The position is currently +$17, also nicely centered.
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 highlighted below:
cycle on Friday. For planning purposes, a synopsis of next week's economic news is below:
Tentative Bank of Japan Policy Rate
10:00 am Existing Home Sales
10:30 am EIA Petroleum Status Report
8:30 am Durable Goods Orders
8:30 am GDP
8:30 am Jobless Claims
10:00 am Personal Income & Outlays
10:00 am New Home Sales
10:00 am Consumer Sentiment
Next week is the planned entry window for the January RUT Iron Butterfly. However, I am still not 100% convinced that we should enter the trade, and may suggest sitting on the sidelines for the January play. Taking a quick look at the RUT 6 month chart, I am not sure whether this is the right time for a non-direction trade such as the Iron Butterfly.
RUT 6 month chart
When I make a recommendation in the newsletter, I am putting your capital at risk. I'm not comfortable doing that if I do not feel comfortable trading it with my own live capital, and at the moment I am still undecided in that regard. I will see what things look like early next week and post an update.
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,