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A flurry of end of the quarter trading pushed volume higher today but trading was largely sideways for the day. The SPX closed the day down $4 at $1141 while the RUT lost less than $2 to close at $676. The markets traded higher this morning on the basis of some favorable economic reports. Initial unemployment claims dropped 16k to 453k while the continuing unemployment claims dropped 83k to 4.46 million. The Chicago PMI rose to 60.4 from last month's 56.7 and the revised estimate of second quarter GDP rose a bit to 1.7% from 1.6%. Tradng volume was up across the board with an 18% increase on the NYSE and a 17% increase on NASDAQ. Trading in the S&P 500 stocks rose above the 50 dma to 3.7 billion shares.
I closed the Nov hedge options in my Oct iron condor on RUT this morning. This position is now in salvage mode; it will end in a small loss at best. The current Greeks are excellent with delta = -$9 and theta = +$229. The Nov condor stands at a P/L of -$1,160 with delta = -$60 and theta = +$85. The delta of the $740 calls pulled back to 16 today so there was no need to adjust this position as yet.
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All of the major indexes closed down modestly today, with the exception of RUT, the index I wanted to pull back a bit! Stocks opened weakly this morning but then recovered and traded near the unchanged mark for most of the day. SPX closed at $1145 for a $3 loss, but RUT gained $2 to close at $678. Trading volume was flat to down for the day with a 5% drop on the NYSE and a 2% drop on NASDAQ. Trading in the S&P 500 stocks rose slightly to the 50 dma at 3.4 billion shares. Some of the news coming out of Europe regarding sovereign debt and the European banks banks has been unsettling and probably accounted for today's weak market in the absence of any significant economic news.
My Oct iron condor has been teetering on the brink of major adjustment for several days if not weeks. Today's strength in RUT pushed me to act. Buying the Nov $690 calls gave me time to wait for RUT to either pull back or at least just trade sideways, but I decided it was just not prudent to wait any longer. I closed and rolled my 690/700 call spreads to 720/730 and closed and rolled my 540/550 put spreads to 610/620. The position remains underwater, but this improved the position Greeks markedly to a delta of +$56 and theta = +$189. At this point, we are in salvage mode. Depending on the outcome of our Nov $690 call hedges, we will either break even or incur a small loss. But the condor trader always looks at the big picture - we made $2,590 last month, so if we break even or lose four or five hundred dollars this month, that's ok. The crucial success factor is to manage the risk so we never incur the large debilitating loss. Our Nov condor sits at a P/L of -$1,360 with delta = -$65 and theta = +$82. If RUT continues upward, we may be adjusting that position as well since the delta of our Nov $740 calls is up to 18.
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Today was a slow news day and the markets just traded sideways most of the day with low volume. The major indexes might have closed unchanged if not for a sell-off in the last hour, resulting in all major indexes closing for modest losses. SPX closed down $7 at $ 1142 while the RUT lost $3 to close at $668. SPX appears to have established $1150 as its new resistance, so a breakout above $1150 and a breakdown below $1131 would be signs to watch for. All of this choppy trading occurred with low volume. Trading was down 17% on the NYSE and down 5% on NASDAQ. Trading in the S&P 500 stocks dropped to 2.8 billion shares, down from Friday's trading right at the 50 dma of 3.4 billion shares. A few individual stocks are moving upward, like GOOG and AAPL, but generally the markets appear stalled here with most traders on the sidelines.
My Oct iron condor is hedged with Nov calls and sitting in fair condition with a P/L of -$2,093 with position delta = -$92, and theta = +$141 on 20 contracts. The 690/700 call spreads are sitting at 0.6 standard deviations OTM while the 540/550 put spreads are over 3 standard deviations OTM with 17 days to expiration. I established the Nov RUT 520/530 and 740/750 iron condor last week for a credit of $2,740 on 20 contracts. It now stands at a P/L of -$800 with a position delta of -$48 and a position theta of +$78. The Jan 2011 270/300/330 call butterfly I recommended to my trading group in July is now up 62% - the market may be stalled, but AAPL is moving!
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Before the market opened, the futures were positive, suggesting a strong open for the markets, but it was short-lived. The September Consumer Confidence Index didn't help, coming in at a seven month low. Traders were encouraged by some comments from some of the European banks, suggesting some help for the European sovereign debt problems. This caused the Euro to rally against the dollar, which hit several month lows today. The Case Schiller Home Price Index came in essentially flat for July. RUT and SPX tested their support levels this morning; SPX traded as low as $1132 (support at $1131) and RUT traded down to $659 before rebounding. By noon the markets had fought their way back to the unchanged mark, but a strong rally in the last hour resulted in gains for all of the market indexes. SPX closed up $6 at $1148 and RUT closed at $675, for a $7 gain. Trading volume increased over yesterday with a 19% increase on the NYSE and a 13% increase on NASDAQ. The S&P 500 stocks traded 3.3 billion shares, just below the 50 dma at 3.4 billion shares.The SPX is still trapped in the trading range between $1131 and $1150; a break out through either of those figures will merit your attention.
My Oct iron condor on RUT stands at a P/L of -$2,573, delta = -$112 and theta = +$110. The theta/delta ratio is essentially at one to one, suggesting we are at the edge of making some serious adjustments. The delta of the Oct $690 calls is 35 and the 540/550 put spreads can be closed for less than $0.20. If RUT drops back into its trading range tomorrow, I will leave the position as is. The Nov $690 calls are buying us time for RUT to pull back or trade sideways. The Nov RUT 520/530 and 740/750 iron condor stands at a P/L of -$1,140 with delta = -$63 and theta = +$81.
So we continue to watch a market that cannot quite decide which direction it wishes to take. These are interesting times for traders.
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The markets jumped up at the open and never looked back. The major indexes just steadily climbed upward all day. The SPX closed at $1149, up $24 on the day. RUT gained $22 to close at $671. Before the market opened, durable good orders were reported for August as down 1.3% but analysts were expecting a decline of 1.4% - does that make for buying euphoria to you? Later in the morning, new home sales were reported as flat month on month - again, not terrible, but hardly optimistic. But the run upward continues to occur on modest volume; trading in the S&P stocks increased slightly to 3.5 billion shares, right at the 50 dma. It just goes to show that the herd can just begin to move in one direction for no obvious reason, and you had best not try to stand in the way; all of your excellent analysis will just be trampled.
Of course, this run upward hurt my Oct iron condor, that now stands at a P/L of -$2,163 with delta = -$105 and theta = +$87. If this run continues next week, we may have to do some surgery on this position.
