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The markets opened weakly this morning but the existing home sales report at 10 am ET sent the markets plunging. But on the positive side, the markets recovered quickly, although the major indexes still closed the day in the red. RUT fell to $589 before recovering to close at $596, down $7 on the day. This matched RUT's low in early July, so it strengthened that support level and can be seen as offering some encouragement; but the flip side is that if RUT breaks through $589... look out below! SPX lost $15 to close at $1052. Both indexes sold off into the close. Trading volume was up across the board today with a 35% increase on the NYSE and a 28% increase on NASDAQ. Trading in the S&P 500 stocks jumped up to 3.8 billion shares today; that is slightly above the 50 day moving average at 3.7 billion shares. The 50 dma has been steadily dropping since mid-June.
My Sept condor stands at a P/L of +$290, delta = +$70 and theta = +$61. This theta/delta ratio of about one-to-one shows that we are nearing the adjustment edge of this position. But after RUT rebounded, the delta of the Sept $540 puts had recovered to 16. This morning's plunge in RUT scared me. I immediately bought two Oct $540 puts, but the sold them about 30 minutes later for a loss of $180 after RUT rebounded. It was the classic whip saw - but better safe than sorry.
The economic data appears to strongly support the premise of a faltering recovery at a minimum. The question now is: has the market's drop of the past three months been the forward looking market response or is there more downside to come? Today's sharp drop after the existing home sales report would argue there is more downside to come as the data worsens, but the rapid intraday recovery appears to refute that interpretation. In the meantime, be sure you are managing your risk and not "betting the farm" on your prediction.
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The markets ran up strongly first thing this morning but were quickly pulled back by the bears and traded along the neutral line most of the day. But the last hour was all selling with the indexes closing at or near their lows for the day. The SPX ran as high as $1081, but closed down $4 at $1067. RUT behaved similarly, running up to $618 before closing at $603, down $8. Trading volume was down across the board, with a 24% decline on the NYSE and a 13% decline on NASDAQ. The S&P 500 stocks traded under three billion shares, well under Friday's volume and below the 50 day moving average.
There was no economic news to drive the market either way today. Some M&A news appeared to boost the market this morning, but it wasn't sufficient to hold the intraday highs. It seems as though the market is afflicted with a general malaise or fear that leads to profit taking whenever stocks trade higher. The low trading volume suggests this sell off is the result of short term trading in and out, rather than a general institutional exit. But the danger of this market is that it won't take much bad news to set off a serious drop.
My Sept iron condor on RUT stands at a P/L of +$740 with a position delta of +$56 and position theta of +$72 on 20 contracts. I plan to initiate my Oct condors later this week.
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The unemployment claims data brought the bears out on a selling spree today. Initial unemployment claims hit a new high of 500k from 488k last week, while continuing claims decreased by 13k to 4.478 million. Then the Philadelphia Fed survey came out at -7.7, down markedly from last month's 5.0. RUT dropped $17 to close at $611 while the SPX dropped $19 to close at $1076. SPX fell through its 50 dma at $1088 like a knife through butter. All of this carnage occurred on increased trading volume. The S&P 500 stocks traded 3.9 billion shares, just above the 50 dma at 3.7 billion shares. Trading on the NYSE increased by 15% and ran up 26% on NASDAQ.
I decided to allow all of the spreads in my AUG iron condor go into expiration; they will all certainly expire worthless with one possible exception for the 590/600 puts, but they have a safety margin of $11. If they expire worthless, this position ends with a $923 gain or 6% on capital at risk. The Sept position stands at a P/L of +$700 with delta = +$46 and theta = +$63. Normally, expiration Friday is a high volume day of trading; it will be interesting to see if volumes are up from today's high levels.
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Trading opened down a bit this morning and drifted lower through the morning, but started to recover from noon onward. RUT traded down to $605 for most of the morning and then fell further to $602 before climbing steadily all afternoon to close at $611, unchanged for the day. The SPX traded in similar fashion, but didn't fully recover its losses, closing down $4 at $1072. Trading volume was subdued for an options expiration Friday; it was up 7% on the NYSE but down 9% on NASDAQ. The S&P 500 stocks traded 3.5 billion shares, down from yesterday and below its 50 dma.
RUT's settlement value has not yet been posted, but it seems likely to be around $605, so all of the spreads in my Aug RUT iron condor will expire worthless (550/560 and 590/600 put spreads and 680/690 and 705/715 call spreads). Thus the Aug iron condor gained $923 or 6% on the $15,400 of capital at risk. August was an extremely volatile month; I adjusted the position with long call or put hedges six times. In addition, I rolled spreads up and down four times. These adjustments consumed much of my potential profit. But remember: without those adjustments, we would have been forced to close this position early for either a breakeven or a loss. The adjustments kept us in the position so we could salvage a small profit. This brings my blog trading account up to an overall gain of 18% - not spectatcular, but pretty good given the market volatility we have been enduring. My Sept 530/540 and 740/750 condor stands at a P/L of +$860, delta = +$43 and theta = +$68.
I follow Mark Wolfinger's blog and I recommend it to you. He is a solid No Hype options trader, educator, and author. Today's blog brings up an excellent point about the potential pitfalls of multi-legged options orders - an excellent tip for condor traders. Check it out.
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The markets opened a bit lower this morning but recovered quickly and
closed with modest gains on lower volume. Both the RUT and SPX charts
were displaying the classic doji candlestick pattern, indicative of
indecision among the traders, i.e., neither the bulls nor the bears were
able to take charge and drive the market today. RUT closed up $2 at
$628 while the SPX gained $2 to close at $1094. SPX tried unsuccessfully
to break through $1100 once again today. If and when SPX closes above
$1100, that will be a significant bullish signal. Trading volume was
down across the board with a 5% drop on the NYSE and a 4% drop on
NASDAQ. The S&P 500 stocks traded 3.2 billion shares, down a bit
from yesterday and still well below the 50 dma.
My Aug iron condor on RUT stands at a P/L of +$753 with position delta =
+$24 and theta = +$243. All of the spreads in this condor are now
greater than two standard deviations OTM so I will probably allow them
to expire worthless. But this depends on tomorrow's market movement.
Even a small move down will cause me to close the 590/600 put spreads.
The Sept position stands at a P/L of +$1,220, delta = +$24, and theta =
+$72.
