- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1745
Markets were alarmed today about possible ramifications of unrest in Egypt on oil prices and the possibility of unrest spreading in the Middle East. A disappointing GDP report for the 4th quarter didn't help. Growth in Q4 GDP was 3.2%, which isn't too bad, but traders were expecting 3.7%. Markets opened down and sank throughout the day. SPX closed just above its lows for the day at $1276, down $23 on the day. RUT lost $20 to close at $775. Trading volume was up with 4.5 billion shares of the S&P 500 stocks trading. Volume increased 34% on the NYSE and increased 17% on NASDAQ. The VIX opened the day under 16% but closed at 20%, a huge jump upward, reflecting the market's anxiety over global events and where this might drive the markets.
My Feb iron condor on RUT stands at a P/L of +$2,400 with delta = +$19 and theta = +$62. Increasing IV diminished the gains on this position, but it remains well positioned in spite of today's big downward move.
I was somewhat encouraged that SPX basically hit its lows for the day around noon and bounced around the 1275-1280 area the rest of the day. That isn't to say it can't go lower Monday, but it wasn't a case of free fall either. Some of the market's leaders, like AAPL and PCLN didn't lose much today, so wholesale selling hasn't yet broken out. But we'll see what next week brings. Perhaps things will calm down a bit in Egypt over the weekend.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1704
The markets opened flat this morning and chopped sideways most of the day, but managed to hang onto some modest gains into the close. The Dow continues to flirt with $12,000 but can't quite make it there. SPX closed up $3 at $1300. This is seen as a significant technical resistance level because this was the last high for SPX before the market fell off the cliff in the fall of 2008. RUT closed at $795, up $2. The S&P 500 stocks traded down a bit from yesterday at 3.5 billion shares. Trading on the NYSE was down 8% and flat on NASDAQ. Initial unemployment claims jumped 51k to 454k and the number of continuing unemployment claims also increased by 94k. But this didn't seem to disturb the market too much, although it may have tempered the bullish action a bit.
My Feb RUT iron condor stands at a P/L of +$2,640 with delta = -$9 and theta = +$66. We are now standing at about 80% of the maximum profit which argues to close the trade. On the other hand, the call spreads are about 1.5 standard deviations OTM and the put spreads are nearly three standard deviations OTM, so that would argue that it is safe to allow this trade to continue to gain in profit ($660 remains on the table). I will probably allow the time decay to progress through another weekend before closing the position. Being too greedy can get one into trouble, but not collecting the gains when the probabilities are on your side doesn't make sense either. The answer is somewhere in between.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1742
The S&P 500 spent almost the entire day in negative territory but rallied at the close to end the day basically flat. Trading volume was up today, so while it may not qualify as a strong bullish day, the end of the day recovery is encouraging. SPX closed unchanged at $1291 and RUT closed up less than a dollar at $780. Trading volume in the S&P 500 rose to 3.8 billion shares and increased 12% on the NYSE. Volume was up 2% on NASDAQ. The Consumer Confidence Index of the Conference Board hit an eight month high of 60.6 in January, up from 53.3 in December. The Case Schiller Housing Price Index dropped 1.6% in November after a 0.5% drop the previous month. The FOMC meeting started today; their statement will be released tomorrow afternoon but most analysts don't expect any substantive changes.
I was encouraged this morning as AAPL, IBM and GOOG all traded upward while the overall market was trading downward. That behavior, coupled with the late day recovery is encouraging, but it still pays to be cautious. Employ good risk management.
My Feb iron condor on RUT continues to be well positioned with a P/L of +$2,520, delta = +$7 and theta = +$61.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1706
The markets ran to new highs today. The Dow broke through the $12,000 target everyone has been watching, but couldn't hold it into the close. SPX closed up $5 at $1297, the highest level of this index since September of 2008. RUT rocketed up $14 today to close at $794, but is still below its 52 week high of $808 set last week. Trading volume in the S&P 500 was down a bit from yesterday at 3.6 billion shares, but remains above the 50 dma. Trading on the NYSE was up 3% and volume was up 5% on NASDAQ. New home sales were encouraging, coming in at 329k for December, up from 280k in November. The FOMC statement was released this afternoon, but there were no surprises, and consequently no effect on the markets. Interest rates remain unchanged and the current round of quantitative easing continues.
My Feb iron condor on RUT stands at a P/L of +$2480 with a position delta of -$12 and position theta of +$82. We will be establishing our March iron condor soon and may close the Feb position early and take that risk off the table.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1757
Large technology names like AAPL and GOOG made some nice gains today and led the broader market higher. IBM's bullish run since its positive earnings announcement last week has driven the Dow close to breaking the $12k level. SPX closed up $7 at $1291 and RUT closed at $779 for a $6 increase. Today's price action was certainly encouraging to the bulls, but SPX really needs to break through the high set last week at $1296 to confidently establish itself as having returned to the bullish uptrend. However, those market analysts looking for a healthy correction can't be too comfortable because last week's weakness didn't really qualify as a correction. Additional data on the bearish side of the camp would be the lower volume on today's positive price action. The market surged pretty strongly across the board, but trading volume was down. Only 3.2 billion shares of the S&P 500 traded, below the 50 dma. Trading was down 25% on the NYSE and was essentially flat (down 1%) on NASDAQ. No significant economic news was out today; the FOMC starts its meeting tomorrow and will issue a statement Wednesday. Nothing new is expected from the FOMC but the risk of a surprise can't be ignored.
My Feb RUT iron condor at 680/690 and 860/870 stands at a P/L of +$2,260 with delta = +$15 and theta = +$69. Some have asked me why I don't roll up the put spreads in this position to sweeten the potential gains. Normally that would be a possibility, but I have been concerned about a possible down turn in this market after having such a strong bullish run, and I felt more comfortable with that large safety margin on the downside. In addition, it is looking more probable each day that I can possibly come close to the full maximum gain for this position of $3300 on 20 contracts. That's about 20% on the capital at risk - that is an excellent gain. I don't want my greed to risk compromising that gain.
Watch tomorrow's open to see if this bullish run can continue. Strong follow through that pushes SPX above $1300 would be very bullish.
