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It is becoming dangerous to be long the markets during the last hour of trading. The markets were modestly up and chopped sideways most of the day, became even more choppy after the FOMC announcement and then sold off in the last hour to close nearly unchanged for the day. SPX closed at $1242, up $1 and RUT lost less than a dollar to close at $772. Trading volume was flat to down with 3.5 billion shares of the S&P 500 stocks trading (below the 50 dma). Trading on the NYSE was up 1% and trading on NASDAQ was up 3%. The Fed announcement didn't reveal anything new, but did result in some choppy trading immediately afterward. Volatility swung up, down, and then back up, to close unchanged at 17.6%.
My Jan SPX iron condor remains at about -$2500 with delta = -$64 and theta = +$84. The 1300/1310 call spreads are about one standard deviation OTM. I closed Dec condors on AAPL and GOOG for gains of about 23%. The question remains whether this market has any more upside left in 2010. Recent gains have brought on bouts of profit taking to hold the overall market in check. Historically, the markets have not trended strongly in either direction the last couple of weeks of the year.
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Today's market started off bullish just as nearly every day has recently. The SPX gained about $5 to $6 and then largely traded sideways until the last hour when it gave back all of the gains to close at $1240, unchanged for the day. RUT actually performed worse than the SPX for a change and lost $5 to close at $772. Trading volume was largely flat with the S&P 500 stocks trading just above the 50 dma at 3.6 billion shares. Trading was down 4% on the NYSE and up 5% on NASDAQ. Volatility hit a new low this morning, breaking below 17%, but then rose this afternoon to close at 17.6%.
I closed the 1280/1290 call spreads of my Jan SPX iron condor for $2.75 and rolled them up to 1300/1310. That brings my Greeks more in line with delta = -$56 and theta = +$73. But my maximum potential gain has been reduced to about $400. I am considering rolling my put spreads up to build a little more profit potential into this trade, but I am wary of a market pullback. The Dec 660/670 put spreads remaining from my Dec iron condor on RUT are far OTM so I will allow them to expire worthless, resulting in a 10% gain for the December position.
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The markets traded largely sideways today but the major indexes did manage to close modestly higher (with the exception of the Dow). SPX finally broke through $1230 and held it into the close at $1233, up $5. RUT made another high (wow) at $768, up $4. Trading volume was flat to slightly higher with the S&P 500 stocks trading at the 50 dma. Trading on the NYSE increased 2% and increased 10% on NASDAQ. The Volatility Index (VIX) dropped almost 3 points to close at 17%. In general, the VIX trades lower as the market trades higher and vice versa. So the fact that VIX has been trending downward as the market climbs isn't surprising. But as VIX gets lower, many analysts see the probability of a market pullback increasing. Jim Bittman gave an interesting talk at the Traders Expo in Las Vegas on the VIX; his message was to watch for divergence of the VIX trend with the market trend for signals of a significant market shift. But what we have here is standard VIX behavior: market trends higher and VIX trends lower.
My Jan condor on SPX sits at a P/L of -$1,139 with delta = -$87 and theta = +$81. The delta of my short call is 21 where I would normally be adjusting this position, but I am allowing this one to move a little further because of my expectation of a slow down in the markets as we enter the holidays. Absent a pullback or several days of sideways action, I will be rolling those call spreads higher soon.
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All of the major market indexes chalked up gains today; the S&P 500 and the Russell 2000 indexes made new 2010 highs today ($1240 and $777, respectively). But these successive gains of the last few days are occurring on flat trading volume. Trading in the S&P 500 stocks remains flat at the 50 dma while volume declined 2% on the NYSE and declined 11% on NASDAQ. That isn't terribly bullish.
Another interesting divergence occurred today: although the SPX gained $7 today to close at $1240 for a new high, the volatility index (VIX) rose about one half point to 17.6% today. Normally we would expect VIX to decline as SPX rises. Everyone I hear on CNBC is bullish; one comment today was "the fix is in", suggesting that the market will continue to trend upward. A few minutes ago, I heard Cramer declare this a "monster bull market".
When all of the gurus are bullish, trading volume is weak, and when the VIX didn't make a new low today, it makes me wonder...
But, in the meantime back at the ranch, my Jan iron condor on SPX is still underwater and the Greeks tell the story with delta = -$104 and theta = +$90. Many signs are suggesting a correction, but I will have to reposition this trade if SPX continues upward.
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The markets traded largely sideways today but managed some small gains at the end of it all. The SPX closed up $5 at $1228 while RUT closed essentially unchanged at $764. Trading volume was down across the board with 3.8 billion shares of the S&P 500 stocks trading, down nearly to the 50 dma. Trading was down 29% on the NYSE and down 7% on NASDAQ. SPX appears unable to break through $1230 to new highs, but, just as importantly, the bears have been unable to pull the S&P 500 down either. RUT has outperformed the blue chips all year, reaching new 2010 highs over the past several trading days. But even RUT is showing signs of slowing down the past two days, trading essentially flat yesterday and today. Most economic data has been consistently showing a slow but steady recovery, but global economic woes appear to still have the street worried. Even a compromise on taxes did little to move this market.
I closed the 790/800 call spreads of my Dec iron condor on RUT today; I will allow the 660/670 put spreads to expire worthless; as they are almost four standard deviations OTM, that appears to be a safe bet. Assuming those spreads expire worthless, this position gained $1,660 on 20 contracts or 10% on capital at risk. The Jan condor on RUT continues to run right along the edge of adjustment with a P/L of -$1539, delta = -$90 and theta = +$92. The delta of the 1280 calls is 20. The theta/delta ratio of about 1:1 tells the story.
