Category: Dr. Duke's Blog
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An old Wall Street saying is to "buy the rumor and sell the news". This morning's market saw favorable reports for the ISM Manufacturing Index, July construction spending, and pending home sales for July. But the market's favorable reaction didn't last long; by mid morning, all of the indexes were falling significantly. The rationale was that all of this good economic news was priced into the market in the recent rally, so profit taking ensued. The SPX closed at $998, near its long term support level of $1000, and RUT closed at $558, just above its $550 support level.

The downward moves of the past few days have been helpful for my iron condors. The Sept condor stands at a P/L of +$1,690, delta = +$17, and theta = +$199. So we are very close to delta neutral with theta decay generating about $200 per day. The Oct condor still has 44 days left in it and this market has left the RUT near the midpoint of this condor; normally, I would be looking to roll up or down one side or the other and take some profits here, but the increased IV has prevented that so far. Currently, the Oct condor stands at a P/L of +$70, delta = -$5, and theta = +$59. As long as the market doesn't "fall off the cliff", we will do nothing with these positions.