Another week of gains; the bullish run continues.
The broad market ended the week slightly higher Friday; the benchmark index SPX closed +2.24 points or .1%. The index reached an intraday high of 2557.65, but pulled back slightly into the close.
SPX 6 month chart
There was not sufficient credit to enter an SPX weekly Iron Condor for October 20; but early next week we are planning to enter an alternate weekly trade, which I mentioned in the mid-week update. This will also be an Iron Condor on SPX, but with more days to expiration (18 - 17). Specifics of the trade will be:
Entry: Monday or Tuesday, 18 or 17 days to expiration
Cycle: November 3 weekly, Option Code: SPXW171103
Entry time: Entry will be after the first hour; but there will not be an entry if SPX has moved up or down one standard deviation.
Minimum Credit: $1.25 or $1.30. The goal is to get as far away from either short strike as possible for a reasonable credit; but we may be able to squeeze another .05 over the usual minimum of $1.25 for the 7-day trade.
TargetGain/Stop Loss: This will remain the same, target gain will be 7% of the margin, and the max loss of 10% will also be the same.
Note: If we are still in the trade the following Monday or Tuesday, we will still enter the next cycle so there could be overlapping positions. For those who plan to enter this new version of the weekly, please keep that in mind when planning your position size/capital allocation.
Below is the open position status:
SPY Monthly Iron Condor for November
This position was opened on Monday October 9; details below:
- SOLD SPY November 259 Call, .67 credit.
- BOUGHT SPY November 264 Call, .13 debit.
- SOLD SPY November 247 Put, 1.00 credit.
- BOUGHT SPY November 242 Put, .65 debit.
Order was filled as an "Iron Condor" for $.89 net credit (all four legs) .
Margin/Risk is calculated by the width of the wings ($500), less credit received.
Margin/Risk for this trade: $411.
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 November Iron Condor:
SPY closed Friday at 254.91; Think or Swim is showing the position +$12 as of the close.
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" RUT Put Credit Spread for December 15
This new trade we are testing was opened Tuesday, October 10; details below:
SOLD RUT December 15 1400 Put, 9.80 credit.
BOUGHT RUT December 15 1370 Put, 7.20 debit.
Order was filled as an "Iron Condor" for $2.65 net credit (all four legs).
Margin/Risk is calculated by the width of the wings ($3,000), less credit received.
Margin/Risk for this week's trade: $2,735.
RUT closed Friday at 1502.66. Think or Swim is currently showing the position +$25, so performing well so far.
Below is the risk graph of this week's position as of the close:
RUT December 15 Put Credit Spread:
Below is the RUT chart showing the short strike:
RUT 6 month chart
The trade is left in play to work until:
1) If the loss reaches $250, the position is closed.
2) When the next monthly cycle is at the 65 days to expiration window, the position is closed, which would be approximately November 14.
Next week's economic news, is summarized below:
8:30 am Empire State Manufacturing Survey
8:30 am Import/Export Prices
9:15 am Industrial Production
10:00 am Housing Market Index
8:30 am Housing Starts
10:30 am EIA Petroleum Status Report
2:00 pm Beige Book
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 November Iron Condor. Monday will be 32 days to expiration; we will look to enter the position at that time 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 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,