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The markets liked what they read in the jobs report this morning and traded up strongly through most of the day. But the major indexes gave back much of their gains in the last hour or so of trading. SPX closed at $1332, up $7 after trading as high as $1338 earlier in the day. RUT set another 52 week high at $847, up $3, after trading as high as $851. Trading volume was flat to down with three billion shares of the S&P 500 trading, well below the 50 dma. Trading volume was down 7% on the NYSE and up 11% on NASDAQ.
216k new jobs were added in March according to the US Nonfarm Payroll Report; this was up from the 194k reported for February. The unemployment rate dropped 0.1% to 8.8%. The ISM index reported out essentially unchanged for March at 61.2 (61.4 last month).
Two things concern me about this market: 1) the fact that the bulls could not hold the highs today, and 2) the continued anemic trading volume. I have to continue to play what the market gives me, but this market seems weak, even as it makes new highs.
I closed the call spreads of my Apr iron condor on RUT today during the late afternoon sell-off. Assuming the Apr 700/710 put spreads expire worthless (that appears to be a safe bet), we will book a gain of $2,220 on 20 contracts or 13% on the capital at risk. This week, I became concerned that this market might just continue to climb upward and having two weeks left until April expiration, I decided it was prudent to close this condor early while we could confirm 93% of the maximum potential gain of $2,400.
The May condor is standing essentially unchanged at a P/L of -$1,240 with delta = -$22 and theta = +$54. The Jun $880 calls are doing their job, hedging our losses and buying us time for the market to pull back. If the market continues higher and forces me to roll the call spread upward, those June calls will continue to reduce our losses. The trick to managing iron condors is not making money every month because you have placed the spreads so far OTM; it is minimizing the losses when they come. Because they will come.
Have a great weekend.
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The markets were very choppy today, trading sideways with modest volume. The major indexes ended the day in mixed fashion. SPX lost $2 to close at $1326 while the RUT set a new 52 week high at $844, up $3. RUT is nearing the highs of 2007 at around $860. SPX appears to be struggling to break through the resistance around $1330 set in early March as the correction began. Trading volume was modest with 3.0 billion shares of the S&P 500 trading, but this is still well below the 50 dma at 3.5B. Trading volume rose 6% on the NYSE and increased 4% on NASDAQ.
Initial unemployment claims were essentially unchanged this week at 388k (down 6k). Continuing claims dropped 51k to 3.7 million. The Chicago PMI reported at 70.6 for March, down slightly from last month's record 71.2. Factory orders fell 0.1% while analysts were expecting a 0.4% increase. This combination of tepid economic data coupled with concern over tomorrow's jobs report served to hold back traders from taking any aggressive positions.
My April iron condor on RUT was essentially unchanged at a P/L of +$2,180 with delta = -$15 and theta = +$39. Our adjustments on the May condor are holding the losses steady for the moment as the RUT squeezes our call spreads; the position's P/L = -$1,460, delta = -$14 and theta = +$59. Delta of the 890 calls has increased to 21. If RUT continues making new highs, we may have to reposition this condor soon.
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The sell-off that ended yesterday's trading appeared to continue at the open of trading this morning, but the bulls quickly took control and all of the market indexes steadily climbed throughout the day. SPX closed at $1319 for a gain of $9 while RUT gained $8 to close at $829. SPX appeared to bounce off its 50 dma at $1307 before climbing to its close at $1319. Shortly after this correction began February 22, SPX fought its way back to $1330 before falling to even lower lows in mid-March. So a close above $1330 might signal the end of this correction. A similar "line in the sand" for RUT is $830. And RUT has been flirting with $830 the past three trading sessions, but has been unable to break through thus far. Trading volume was flat to low today with 2.6 billion shares of the S&P 500 trading; that was slightly better than yesterday, but still well below the 50 dma at 3.5 billion shares. Trading was down 3% on both the NYSE and NASDAQ. Low trading volume this near the end of the quarter is a little surprising. Usually one sees a flurry of institutional activity, positioning portfolios for quarterly reporting.
My condors are essentially unchanged from yesterday. The April condor stands at a P/L of +$1900, delta = +$5 and theta = +$77. The May condor stands at a P/L of -$760, delta = -$66 and theta = +$98. While April just continues to grind out the remaining potential profit, the May position flirts with adjustment on the call spread side. The delta of the $890 call = 16. This market continues to tease us, unwilling to commit to an end of the market correction, but not really trading lower either. Reminds me of Greek mythology, with the Gods toying with us humans.
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The markets gapped open and steadily gained until early afternoon; but very little of that gain was lost in the sideways afternoon trading. Trading volume was up a bit from yesterday, but still below the moving averages. SPX closed up $9 at $1328 and RUT gained $11 to close at $840. SPX has yet to regain the $1343 peak it hit in mid-February before this correction started. In contrast, RUT closed above the pre-correction close of $838. So RUT is once again leading the charge as it did through most of last year. About 2.9 billion shares of the S&P 500 traded today, up a bit from yesterday but well below the 50 dma. Trading volume was up 10% on the NYSE and up 12% on NASDAQ.
ADP reported an increase of 201 thousand private payroll jobs in March; analysts had expected 210k. ADP's report may indicate a favorable jobs report on Friday. If so, that will further fuel this bullish market.
My April iron condor on RUT at 700/710 and 900/910 stands at a P/L of +$1,700 with delta = -$7 and theta = +$123. I adjusted my May iron condor on RUT this morning and improved the Greeks considerably; this position now stands at a P/L of -$1,500 with delta = -$12 and +$58. Subscribers to Flying With The Condor™receive those adjustment trade alerts in real time during market hours.
It fascinates me how quickly the markets can change. It seems like yesterday that traders were concerned about Middle East unrest, the civil war in Libya, the earthquake and the possible nuclear disaster in Japan. Now the bulls are running the show. The lessons for us: trade what the market gives you; don't remain wed to your predictions; adjust or get run over.
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It looked like another modest, but upward trending day, but the bears showed up to play during the last few minutes of the trading session, pushing the major indexes to modest losses. SPX closed at $1310, down $4 while RUT lost $2 to close at $822. Trading volume dropped again today with only 2.5 billion shares of the S&P 500 stocks trading. Trading dropped 5% on the NYSE and dropped 10% on NASDAQ. The markets have been surprisingly bullish over the past few sessions given the number of worrisome
global events and the apparent inability of the US government to address
the spending/deficit issues. The equity markets are being propped up by
the Fed. The questions surround how this play ends. The FOMC has
announced that QE II will end by the end of the second quarter.
Increasing oil and food prices are causing more Fed committee members and Fed watchers to
begin to talk about tightening measures. In the meantime, the bulls
appear to be in charge, although trading volumes have been anemic,
suggesting many traders are wary.
My April iron condor on RUT is just churning out profits in this lackluster market. It now stands at a net gain of $1,900 with delta = +$16 and theta = +$61. My May RUT iron condor at 680/690 and 890/900 stands near break-even with a P/L of -$600, delta = -$55 and theta = +$88.The maximum possible gain on the April condor is $2,400. Some traders make it their practice to close credit spreads when they can confirm a majority of the gains. I have adopted the rule of closing spreads on the Friday before expiration if the spread is less than two standard deviations OTM. Otherwise, I allow the spreads to expire worthless. I prefer not to give away the $20 to $40 per contract plus the trading commissions unless I have to for safety's sake. In my experience, two standard deviations is a very safe margin. If you are trading many contracts, we are talking about several hundred dollars. That may not be much compared to the overall gains, but it is still one or two nice dinners at one of my favorite restaurants, like Picasso's in Las Vegas, or Wildfire in Chicago.
