An ugly week as investors take flight to safety; 2nd weekly loss in a row.
The broad market shifted between gains and losses Friday as President Donald Trump strategist Stephen Bannon departed the White House, following Thursday's selloff fueled by a terrorist attack in Barcelona and rumors that economic adviser Gary Cohn might resign.
The benchmark index SPX closed down -4.46 points, .2%, at 2525.55. Friday's close represented a loss for the week of -.7%, the second weekly loss in a row.
SPX 6 month chart
The CBOE's volatility index VIX spiked to a high Thursday of 15.77, but managed to settle down a bit on Friday and close at 14.26, -8.3%.
VIX 6 month chart
Below is the open position status:
SPY Monthly Iron Condor for September:
This position was opened on Monday, August 7; details below:
- SOLD SPY September 252 Call, .53 credit.
- BOUGHT SPY September 257 Call, .08 debit.
- SOLD SPY September 238 Put, .97 credit.
- BOUGHT SPY September 233 Put, .62 debit.
Order was filled as an "Iron Condor" for $.80 net credit (all four legs) .
Margin/Risk is calculated by the width of the wings ($500), less credit received.
Margin/Risk for this trade: $420.
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 September Iron Condor:
Think or Swim is currently showing the position down -$7, a mild rally would help the position. SPY closed Friday at 242.58, -.13 or -.05%.
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.
RUT Monthly Iron Butterfly for September
This position was opened on Monday, August 14; details below:
- SOLD RUT September 1390 Call, 21.05 credit.
- BOUGHT RUT September 1440 Call, 3.40 debit.
- SOLD RUT September 1390 Put, 26.05 credit.
- BOUGHT RUT September 1340 Put, 10.80 debit.
Order was filled as an "Iron Condor" for $32.90 net credit (all four legs).
Additional Order to cut Deltas on upside:
BOUGHT RUT September 1460 Call
Order for extra long call was filled for $1.20.
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: $1,830.
Target Gain: 5% of the gross margin ($250/contract)
Max loss: 10% of the gross margin ($500/contract)
On Thursday, August 17, RUT reached the downside adjustment trigger and was adjusted; details below:
BOUGHT RUT September 1390 Put, 33.05 debit.
SOLD RUT September 1340 Put, 13.60 credit.
SOLD RUT September 1370 Put, 23.10 credit.
BOUGHT RUT September 1320 Put, 9.70 debit.
Net debit (all four legs): $6.05
The position summary after the adjustment is as follows:
SHORT September 1390 Call Call
LONG September 1440 Call
SHORT September 1370 Put
LONG September 1320 Put
LONG September 1460 Call bought at trade entry to cut position delta.
The position is now a 20 point wide Iron Condor.
The guidelines call for the second adjustment to be made if RUT reaches either short strike. However, since RUT is already below the short strike of 1370, we will let the position work a bit before acting too quickly. The new downside breakeven point is 1344 so there is a bit of room.
Below is the risk graph as of the close Friday:
RUT September Iron Condor:
Think or Swim is showing the position +$87 as of the close Friday, a rally would help the position get back to centered. RUT closed Friday at 1357.79, -1.15 points of -.08%.
RUT 6 month chart
Next week's economic news, is summarized below:
Monday and Tuesday, August 21 and 22
No economic reports
10:00 am New Home Sales
10:30 am EIA Petroleum Status Report
12:00 pm Fed's Robert Kaplan speaks
8:30 am Jobless Claims
10:00 am Existing Home Sales
8:30 am Durable Goods Orders
For those unfamiliar with the strategies we trade, the trade management guidelines for all the Couch Potato Trader plays 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,