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The markets staged another strong rally today. SPX traded upward by $15 to close at $1178 and RUT closed at $693, up $10. The only economic news was the durable orders report, up 4% in July, a big improvement from June's 1.3% decline. However, I don't think that sparked the rally; it appears the market is convinced Bernanke will announce something Friday that will be bullish for equities. Trading volume in the S&P 500 came in at 3.6 billion shares, just above the 50 dma at 3.5 billion. Trading was down 8% on the NYSE and was down 13% on NASDAQ. I'm not sure what became of all of the panic over Europe and the double dip? It could come back with a vengeance depending on even slight nuances from Bernanke on Friday. Stay alert.
My Sept iron condor on RUT stands at a P/L of +$600 with position delta on 20 contracts of +$12 and theta = +$122. How did your portfolio fare during this extreme bout of market volatility in August? My Flying With The Condor™service is up 24% for the year. One of my clients sent me this email today, "Thanks again for saving my butt through this latest downturn. I was
amazed at how well the adjustments worked. Very little damage in my
accounts".
Would you like to learn to trade delta neutral and survive extreme markets such as those we just experienced? Sign up for the Delta Neutral Options Trading course that starts next week.
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The markets opened up strongly this morning and, unlike most days recently, stayed on that positive track all day, leading to positive gains across all of the major market indexes. SPX tacked on $39 to close at $1162. RUT closed at $683, up $32. Trading volume was up in the S&P 500 stocks, with four billion shares trading. Trading volume was up 2% on the NYSE and was up 10% on NASDAQ.
The only economic data out today was the report of new home sales for July; they came in at 298k, about even with the 300k in June. Many traders are anticipating something positive for the markets from Bernanke's speech at Jackson Hole on Friday, but that worries me a bit - what if Bernanke disappoints? This is an extremely nervous and volatile market.
My Sept iron condor on RUT is still hedged; I have learned the hard way not to remove my hedges too soon. What I lose on the hedge options is relatively small compared to the potential losses on the condor spreads if the market whipsaws. That position stands at a P/L of +$480 with position delta = -$16 and theta = +$39 on 20 contracts.
Today's market probably makes us all feel better, but this remains a very dangerous market. As always, it pays dividends to be strictly following your risk management rules.
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The markets logged another huge trading range day, so the price volatility records continue to be broken. SPX closed at $1138, down $56 while RUT lost $42 to close at $663. The major indexes didn't close at their lows, but they were not far off the lows of the day. Trading volume spiked back up, with 5.1 billion shares of the S&P 500 trading today. Trading volume rose 63% on the NYSE and rose 45% on NASDAQ. The European debt crisis continues to dominate the news and worry traders. But the Philadelphia Fed survey for August spooked them even more with a drop from +3.2 to -30.7 in one month. Existing home sales also dropped to an annualized rate of 4.67 million. Leading indicators rose 0.5%, providing one glimmer of good news.
Many market observers expected a retest of the recent lows, but I think the strength and range of today's move was unnerving. The lows on SPX were around $1120 and SPX only traded as low as $1131 today. Many stocks are trading at bargain basement levels; will this tempt the bulls to reappear? Or is the fear over European debt too compelling?
My Aug 600/610 put spreads were three standard deviations OTM, and the 750/760 call spreads were even farther OTM, so I allowed both spreads to go into expiration and presumably expire worthless. This will complete my Aug iron condor on RUT with a loss of $356 on 20 contracts or a 2% loss. The Sept position is hedged and stands at a P/L of +$460 with delta = -$12 and theta = +$2. I wonder what surprise the market will bring us tomorrow?
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Markets jumped up at the open, but gave back the gains by noon and traded weakly into the close. Most of the major market indexes closed virtually unchanged for the day on lower volume. SPX closed at $1124, unchanged for the day and RUT was also unchanged at $651. Trading volumes dropped from Friday, which was expiration Friday; options expiration normally results in higher volumes. 3.7 billion shares of the S&P 500 traded today, just above the 50 dma of 3.5B. Trading was down 20% on the NYSE and was down 18% on NASDAQ.
The charts appear to show a building of support at $1120 on SPX and $650 on RUT. Today's candlestick on SPX was a shooting star; that may be ominous for tomorrow. Instead of building a support level, we could be pausing for the next leg down in a bear market.
RUT settled Friday at $651.70 so both of the remaining spreads in my RUT iron condor for August expired worthless for a loss of $356 on 20 contracts or a 2% loss on the capital at risk. The Sept condor stands at a P/L of +$700 with delta = -$4 and theta = +$14. Now we go back to watching to see which way this market turns: building support or about to tip over into a bear trend downward?
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The S&P 500 index couldn't hold above $1200 once again, closing at $1194, up $1. RUT closed down $1 at $704. Trading volume declined once again to 3 billion shares of the S&P 500 stocks. Trading volume on the NYSE dropped 15% and volume dropped 8% on NASDAQ. When one looks at the SPX chart, it is easy to postulate two very different conclusions: either a sideways consolidation pattern is developing or a downward trend is underway. The strong bullish trend ended in mid-February and we have been trading sideways ever since; of course, the decline of the past couple of weeks was a rude departure from that sideways trend. So now either of two cases can be made: 1) we are still in the sideways consolidation pattern, but just had a slight hiccup courtesy of the S&P bond downgrade, or 2) we started a downward trend on May 1. It is becoming harder to see this as a temporary respite from the bullish trend. The U.S. and European sovereign debt issues are the dark clouds hanging over this market; it is hard to imagine a strong bullish trend resuming.
The markets have cooperated with my August iron condor with put spreads at 600/610 and call spreads at 750/760. The put spreads are 7 standard deviations OTM and the call spreads are 3.5 standard deviations OTM. Thus, unless something dramatic happens tomorrow, I will allow both the call and put spreads to expire worthless this weekend. Currently the P/L for the 20 contract position stands at -$516, delta = -$10 and theta = +$550. The Sept iron condor on RUT is positioned at 600/610 and 780/790. Both spreads are outside of one standard deviation OTM and the P/L on 20 contracts is +$1,780 with delta = -$21 and theta = +$130. Watch that $1200 level on SPX for your clue on this market.
