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Traders continued to worry about the European debt situation today, driving the indexes lower from the open. Similar to yesterday, much of the losses were recovered before the close. An improvement in the consumer confidence survey helped, rising from 49.9 in October to 54.1 in November; in addition, the Chicago PMI rose to 62.5 from last month's 60.6. But the indexes still closed with losses for the day. SPX lost $7 to close at $1181 after trading as low as $1174. RUT closed at $727, down $5. Trading volume was up across the board with 3.8 billion shares of the S&P 500 stocks changing hands; volume was up 34% on the NYSE and up 36% on the NASDAQ. Both indexes continue to trade within the consolidation range of the past three weeks or so.
My Dec RUT condor stands at a P/L of +$820 with delta = +$33 and theta = +$163. The Jan condor on SPX stands at -$1600 with delta = -$9 and theta = +87. This position is still delta neutral and the put spreads are well over one standard deviation OTM, but today's increase in volatility hurt the position's P/L.
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The markets opened weakly in response to news of Ireland's bailout amid concerns about other European countries perhaps needing similar programs in the near future. SPX dipped as low as $1174 before rebounding to close at $1188, down less than $2. RUT also dove as low as $721 before recovering most of the losses to close at $732, down only $1 on the day. Trading volume was up as compared to Friday's half day of holiday trading, but remained below long term averages. 2.9 billion shares of the S&P 500 stocks changed hands but the 50 dma = 3.5 billion shares. The major indexes are marking pretty clear trading ranges over the past three weeks or so. The question is whether some event can cause a break out one way or the other? It seems like a good time for sideways strategies on your favorite stocks.
My Dec RUT iron condor at 660/670 and 790/800 is in nearly perfect position with a P/L of +$840, delta = +$7 and theta = +$185. The Jan SPX iron condor at 1060/1070 and 1280/1290 stands at a P/L of -$300, delta = -$18 and theta = +$67.
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The major market indexes recovered yesterday's losses in a strong upward move today. SPX ran up $18 to close at $1198, just below the $1200 resistance level. RUT ran $17 to close at $737, approaching the highs of early November. These moves were motivated by favorable economic reports. Initial unemployment claims dropped to a two year low at 407k, down 34k from last week. Continuing unemployment claims came in at 4.18 million, down from last week's 4.32 million. The consumer sentiment survey from the University of Michigan moved up to 71.6 from last month's 69.3. But, on the other hand, new home sales dropped 8.1% and durable goods orders declined 3.3%. However, this bullish move must be tempered with the low pre-holiday trading volume. Trading in the S&P 500 stocks dropped to 2.7 billion shares, well below the 50 dma. Trading on the NYSE was down 20% and declined 14% on NASDAQ.
My Dec condor on RUT at 660/670 and 790/800 is very well positioned with a P/L of +$800 and a position delta of -$12 and theta = +$147. I initiated an iron condor on SPX this morning at 1060/1070 and 1280/1290 for a credit of $3,100 on 20 contracts. The position delta is -$33 with theta = +$64. I gave myself a bit more safety margin on the put side just in case the Euro debt situation or the Korean conflict becomes a greater concern for traders.
You have my best wishes for a happy and meaningful Thanksgiving with your families. It is important and healthy to pause often and remind ourselves how fortunate we really are.
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Traders slept in after indulging in too much turkey yesterday. Trading volume on this shortened holiday trading session was anemic by all standards. The few traders who were in the market appeared to still have their concerns about Ireland and the rest of the EU's economic problems. SPX declined $9 to close at $1189 while the RUT index lost $4, closing at $733.
My Dec RUT condor stands at +$360, delta = +$6 and theta = +$178. Volatility jumped today and that reduced the bottom line for this negative vega position. But the theta/delta ratio is excellent and the trade is almost precisely delta neutral. My Jan SPX condor stands at -$680, delta = -$20 and theta = +$68.
I updated the trading track record for Dr. Duke's Trading Group this morning; we have enjoyed an 88% win/loss ratio since we started in April. Maybe you should check us out.
Enjoy the rest of your holiday weekend.
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The markets have been under pressure recently due to concerns about European sovereign debt and some debate over the effectiveness of further quantitative easing by the Fed. But the Korean conflict and continuing tensions added fuel to the fire. Stocks opened down and stayed down throughout the day. SPX traded as low as $1177 before bouncing weakly to close at $1181, down $17. RUT traded down to $720, off $7. Third quarter GDP grew 2.5%, up from the second quarter's 1.7%. But this good news was largely ignored. The FOMC minutes caused minimal reaction in the markets; the Fed cited broad-based evidence of recovery, but it is very modest, and they foresee minimal improvement in the unemployment picture in the short term. Trading volume was flat to down with a modest increase in trading in the S&P 500 stocks to 3.4 billion shares, below the 50 dma at 3.6 billion shares. Trading on the NYSE was down 13% and flat on NASDAQ. The low trading volume suggests the large institutional traders have not yet pushed the exit button in response to the Korean situation, but that could change quickly. The volatility index, VIX, jumped to 21% today, but closed off of its highs.
The Dec condor sits at a P/L of +$580, delta = +$45 and theta = +$107. The theta/delta ratio is still strong and the delta of the $670 puts is at 16, so this position is in good shape thus far in this correction. Now we watch Korea to see what happens next; of course, Ireland, Portugal or Greece could steal the spotlight at any moment as well. In short, there are several potential events that could spark a sell-off - a little disconcerting.
