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Concerns over European debt problems and the foreclosure crisis in the states appeared to dominate traders' thinking today as stocks struggled to stay positive. The SPX hit a low at $1185 before rebounding to close at $1198, down $2. RUT was more positive, closing up $3 at $727. Trading volume was flat with 3.2 billion shares of the S&P 500 stocks trading and volume declined 18% on the NYSE. Trading volume on NASDAQ increased 2%. The support that was found for the SPX is a positive sign that this correction may have run its course, although this market defies prediction. The only certainty is volatility.
My Dec iron condor is in excellent shape with a P/L of +$640, delta = +$13 and theta = +$136. It seems hard to believe that we will be looking at January options positions soon. Where did this year go?
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[I was speaking yesterday at the Traders Expo and thus this blog is late]. The markets opened down yesterday morning, somewhat in reaction to the strength of Thursday's markets. But by mid-morning much of the loss had been recovered and the major indexes closed for the day either even or up slightly. SPX closed up $3 at $1200 and RUT closed at $724, up $4. Concerns about Ireland's debt situation and China's efforts to rein in inflation continue to weigh on this market. Friday's price action was encouraging, suggesting that many traders saw the morning lows as a buying opportunity. Trading volume was down, in spite of options expiration. Trading in the S&P 500 stocks came in at 3.2 billion shares, below the 50 dma. Trading on the NYSE and on NASDAQ both dropped 10%.
My Dec iron condor on RUT stands at a P/L of +$560, delta = +$32 and theta = +$100. This position is nearly perfectly positioned and the theta/delta ratio is excellent. At times like this, the condor trader knows time is on his side.
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The markets opened lower primarily over concerns over European sovereign debt, especially Ireland's situation. But unlike other recent days, there was no bounce in the first few minutes; the market plunged all morning and then traded largely sideways the rest of the day. SPX lost $19 to close at $1178. RUT closed at $705, down $15. This places both of these indexes well into the consolidation range in October that preceded the run-up from anticipation of the Fed's quantitative easing operations. The bad news is that there is room to drop before we hit support for SPX in the area of $1165 and RUT at approximately $690. Today's severe drop occurred with increased volume, which underscores the bearishness of the recent moves downward. Over 4.3 billion shares of the S&P 500 stocks traded today, well above the 50 dma at 3.6 billion shares. Trading on the NYSE increased a whopping 51% and it increased 19% on NASDAQ. Commodities were also down today, including a 2.3% drop in gold.
I closed half of the put spreads in my Dec iron condor on RUT and also hedged the position. At the close, this position stood at a P/L of +$265 with a delta = -$27 and theta = +$15. I will give this market a few days to settle down before entering new put spreads. I closed all of my GOOG spreads today, but I am still holding several AAPL positions. So now we watch to see where the bottom of this move may be.
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Wow! The market's concerns about Ireland and European sovereign debt sure went away in a hurry. The volatility of this market just continues to amaze me. SPX surged ahead $18 to close at $1197 and RUT closed at $721, up $13. And these gains were made on strong volume. Trading on the NYSE increased 30% and increased 12% on NASDAQ. The S&P 500 stocks traded 3.7 billion shares, above the 50 dma. The VIX dropped over three points to 18.75%. Such a strong move on increased volume with a large decrease in the VIX
is certainly bullish, but one has to wonder about this market's fickle behavior.
My Dec iron condor is trading at about breakeven with a delta of +$3 and theta = +$66. I removed my put hedge today, but one still has to watch this market closely.
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The markets opened up in positive territory this morning, buoyed by rising retail sales numbers for October. But the markets ran into the headwind of a rising U.S. dollar, strengthened in response to concerns over a potential EU bailout of Ireland. The major indexes traded largely sideways most of the day, but managed to stay in positive territory until the last hour of trading, when the bears took control. The SPX closed at $1198, down $1 while RUT closed at $720, up $1. The support level around $1200 on the SPX appears to be holding thus far in this correction, although it broke slightly below $1200 in the last 15 minutes of trading today. Trading volume of the S&P 500 stocks fell below the 50 dma to 3.2 billion shares. Trading on the NYSE was down 16% and was down 14% on NASDAQ.
Consumer spending rose 1.2% in October but the Empire Manufacturing Index came in at -11.14, while analysts were predicting +11.7. This is the first negative decline of this measure of manufacturing activity in New York state since mid-2009. With the Fed's plans for another round of quantitative easing taking heat both domestically and internationally, one has to wonder if the markets are simply pricing in less quantitative easing?
My Nov condor position only consists of the 600/610 put spreads at this point; assuming they expire worthless, this position will result in a loss of $4,281 on 20 contracts. While a loss is always disappointing, we managed to constrain the loss to approximately a normal month's gain. In this way, we can maintain a positive return longer term. The Dec iron condor stands at a P/L of +$740 with delta = +$14 and theta = +$113. This position has a maximum potential gain of $4,900 since we rolled the original put spreads from 590/600 up to 660/670. My long positions in AAPL and GOOG are still holding support, but are on the edge of being stopped out by this pull back.
