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The markets opened in negative territory and recovered somewhat, but weakened toward the end of the day and all of the major indexes closed with small losses for the session. SPX closed down $8 at $1337 and RUT lost $10 to close at $831. Trading volume dropped from Friday with 2.4 billion shares of the S&P 500 trading today. Trading volume rose 4% on the NYSE and dropped 3% on NASDAQ.
There wasn't any new economic data today, so all of the CNBC talking heads were focused on the debt ceiling negotiations. As they breathlessly talked about the end of the world as we know it, if we don't have a deal by August 2, I couldn't help remember the old story of Chicken Little crying that the sky was falling. Anytime a guest suggested this was a bit overdone, the hosts would leap on him as though he was an irresponsible nut. However, all one has to do is look at the bond markets - they aren't concerned; why do you suppose that market would be calm if the end is so near? One factual tidbit to feed the debate: only 12% of federal revenue to used to service the debt. If it only took 12% of your pay check to pay your mortgage, do you think the bank would worry about you defaulting? So why all the talk about the U.S. defaulting on its debt? The answer is politics and the talking heads love to drum up suspense and hysteria.
In the meantime, my Aug condor on RUT stands at a P/L of +$1,322 with a position delta of -$55 and theta of +$119 on 20 contracts. The Sept condor stands at a P/L of -$800 with a position delta of -$61 and theta of +$82. Both of these positions have plenty of safety margin to the downside, so we are in good shape to navigate these volatile markets. Don't panic; stay calm and wait for the high probability trade.
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Yesterday's big gains were on very high trading volumes, a big change from the recent pattern of persistent low volume days. But it appears like all of those traders went home yesterday and didn't come back. SPX dropped down this morning, recovered, and then spent the day trading largely sideways, closing up $1 at $1345. RUT also gained less than a dollar to close at $842. Only 2.5 billion shares of the S&P 500 stocks traded today, significantly down from yesterday's 3.7 billion shares. Trading was down 25% on the NYSE and was down 30% on NASDAQ.
No significant economic reports came out today and the market seemed to reflect that lack of news.
My Aug condor on RUT stands at a P/L of +$1,062 with delta = -$83 and theta = +$91. I opened my Sept RUT condor at 670/680 and 900/910 earlier this week; it stands at a P/L of -$700 with delta = -$78 and theta = +$61.
Have a great weekend!
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One of my favorite magazines growing up was Mad Magazine and "What, me worry?" was the tag line for the satirical magazine. Now some of you are applauding my choice of that magazine and some are thinking you now understand why I need professional help - it was that kind of magazine; you either loved it or hated it.
The markets opened up in positive territory today and then moved even higher after some encouraging news from the discussions (too polite a word) in Washington concerning the debt ceiling. SPX gained $21 to close at $1327 while RUT closed at $835, up $19. But today's strong surge seemed surprising after so many days of pessimism and disaster scenarios being played out by all of the Chicken Littles on CNBC. The same very real and very serious issues remain, but we traded higher - happy days are here again. Trading volume bounced up as well with 3 billion shares of the S&P 500 trading; the 50 dma = 2.8B. Volume was up 7% on NASDAQ but flat on the NYSE.
After hours, AAPL is trading around $400 after another stellar quarter. The Jan 2012 350/400/450 butterfly we have in our trading group will get a nice boost tomorrow, but this move came too soon. If AAPL continues on upward, we will have to close this trade early. That is the problem with options trading; you have to predict the price and the timing of the move. I thought $400 was a reasonable target for year-end. But what am I complaining about - we are making money.
My Aug iron condor on RUT stands at a P/L of +$862 with a position delta of -$65 and position theta of +$110. So now it will be interesting to see how long we can go without the malaise of Euro zone debt, unemployment, etc. catching up with us again.
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The futures were in positive territory this morning, but trading stalled shortly after the open and the markets just traded sideways all day. SPX closed down $1 at $1326 while RUT traded down $2 to close at $832. Trading volume pulled back from yesterday with 2.7 billion shares of the S&P 500 stocks trading today. Trading volume was down 7% on the NYSE and was down 1% on NASDAQ.
The only significant economic news today was existing home sales coming in at 4.77M in June, essentially unchanged when compared to May's 4.81M.
My Aug iron condor on RUT stands at a P/L of +$1,282 with delta = -$65 and theta = +$89. Since the 670/680 put spreads are so far OTM, the theta/delta ratio is a bit skewed for this position. The delta of the 890 calls is only 9, so the position is reasonably safe for the time being - but who knows what tomorrow will bring?
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The mood on Wall Street continues to be rather pessimistic with everyone focused on disaster scenarios such as a Euro zone default bringing down the global economy or Washington gridlock leading to the U.S. defaulting on its debt (this scenario is being told largely as a negotiating tactic - in reality, it is highly unlikely). The earnings reports so far have been pretty good but that hasn't affected trading outside of the particular stocks reporting. SPX closed down $11 at $1305 and RUT lost $13 to close at $816. Markets were down even more in early trading but recovered somewhat through the day. Outside of gold and AAPL, the screens were largely red. AAPL set a new all time high at $374 in advance of its earnings announcement tomorrow evening. But trading volume was down from Friday with 2.8 billion shares of the S&P 500 trading (right at the 50 dma). Trading volume on the NYSE was down 19% and trading was down 3% on NASDAQ.
My August iron condor on RUT continues to plug along, now at a net P/L of +$1,802 and delta = -$9 and theta = +$66. The pull back of the past week or so has actually pulled this condor back to a nice delta neutral position. The AAPL Jan 2012 butterfly recommended in my trading group a few weeks ago is doing well with AAPL's run upward; this position is already up 36%.
Today I opened a new section in the free Downloads area of this web site. I invite any of my blog readers to contribute any file that might be of interest to your fellow traders. The first entry is an article from one of my clients describing his journey learning to trade. If you have spreadsheets that you have found useful in your trading or anything else you would like to share, just send it to me with a note describing it and I will upload it to the web site.
Are you positioning yourself for Apple's earnings announcement? It should be interesting...
