- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 2242
The markets seemed quiet and cautious as they anticipate the FOMC meeting tomorrow. Trading volume was down about 10% on the NYSE and the NASDAQ. The Empire State Manufacturing Index fell to 22.9 from last month's 24.9 value, and that may have contributed to the market weakness this morning. But the buyers returned to the floor late in the day and drove the markets back up. RUT traded as low as $669, but recovered to close at $674 for a loss of $2. The SPX closed at $1151, essentially unchanged after trading as low as $1141. Tomorrow afternoon's market is likely to be volatile with everyone trying to analyze the Fed's announcement and guess when this period of cheap money is likely to start coming to an end.
My Mar iron condor position continues to lessen its loss each day; today's theta decay is $815. I may be able to hold the loss this month to approximately one month's gain - not a great performance but it meets the goal of minimizing the losses in these extreme months of market movement. Our April condor now stands at a P/L of -$2,175 with delta = -$18 and theta = +$81. Our position is essentially delta neutral and the theta/delta ratio is excellent.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 2204
The markets opened this morning and dropped several points, but then recovered and just traded sideways in very choppy fashion all day. A rally in the last half hour of trading brought the markets back to the unchanged mark. I take this last few minutes of trading as a bullish sign since traders did not appear to be taking money off the table for the weekend. Retail sales were reported up for February but the Michigan Consumer Sentiment report surprised traders with a drop for March when they were expecting a small increase. The dollar traded down today, but this didn't seem to fuel the market as it has recently. Trading volume pulled back a bit on the NYSE and NASDAQ, but it remained above average on the S&P 500. RUT closed at $677 down less than a dollar from the open. SPX closed right at its 52 week high of $1150, down $0.25 for the day. My March and April iron condors are largely unchanged at this point as the markets drift sideways. So the question remains: is this bullish rally stalled or just pausing for a moment? But we can only play the market move we see, not what we predict, so we wait.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 2294
The major indexes opened up and traded modestly higher this morning until around 11:15 ET, when selling pressure took over and drove the indexes down near their opening levels. But RUT and SPX recovered much of their losses to close modestly up for the day. The absence of a strong bullish case is evidenced by both SPX and RUT being unable to hold their highs yesterday and again today. However, in both cases, the indexes are making net gains, albeit modest. Jobless claims will be released tomorrow and both retail sales and the Michigan consumer sentiment numbers will be reported Friday; this economic news is likely to move the market. RUT closed up a little over $5 at $677, a new 52 week high. SPX continues to flirt with its 52 week high at $1150. It ran as high as $1148 today before closing at $1146, a rise of $5.
My March and April condor positions continue to trade in the red. Theta for the March position is now at +$268; this is nibbling away at the net losses for March each day. While the April condor is also sporting a net loss, the position Greeks are actually pretty good with delta = -$11 and theta = +$73. This position still has a reasonable profit potential, but I am just nursing March to a smaller loss. So we wait to see if this strong bullish run continues.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 2236
The markets opened weak this morning after being disappointed by the latest jobless claims data. New jobless claims fell by 6k to 462k this week, but economists are looking for a number less than 425k to suggest the beginnings of strong job growth. Over 4.6 million are on unemployment benefits, but this number excludes another 5.7 million who have exhausted their 26 weeks of regular benefits and are on extended benefits. Against that backdrop, the bullishness of this market is surprising. Today's trading volume was down 15-20% on the NYSE and the NASDAQ. But after chopping along down and sideways all day, the bulls took over in the last hour of trading and pushed the indexes to gains for the day. After a day of choppy low volume trading, RUT managed to set a new 52 week high at $677, while the SPX matched its high set earlier this year at $1150. So the pace of increase has slowed, but new highs are being set, although with lower volume.
My March and April condors are basically treading water at this point; the losses of the March position are slowing decreasing. The April condor is well hedged with May calls, and that is holding the losses in check. If the market would pull back a bit, we could remove those hedges. Or if the market traded up a bit, we would close and roll our call spreads upward. For now, we are caught in the middle without a move. So we wait and allow time decay to work its magic.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 2325
The markets continued their surge upward most of the day but around 2:30 ET, profit taking took over. It may also be significant that the S&P 500 was approaching the 52 week highs set in January. All of this took place with a large surge in trading volume. Volume was up 25% on the NYSE and 17% on the NASDAQ. Trading volume for the S&P 500, at 4.5 billion shares, broke strongly through the 50 day moving average at 3.8 billion shares. RUT closed up $3 at $670 while the SPX ran as high as $1145 before settling back to close up $2 at $1140. For those of you who study candlesticks, you will see a classic shooting star on the RUT and SPX charts. All of this adds up to a strong possibility that the market is pausing to catch its breath here, if not pulling back a little bit. Given the recent run upward, a little profit taking appears to be very reasonable.
My March condor continues to swim in red ink; RUT's correction followed by this meteoric rise is conspiring to deal me my worst loss in some time. Today's whipsaw didn't help. The run upward today forced me to close my 680/690 call spreads. But after watching the market's action detailed above, I sold those spreads again just before the market closed. Of course, this is a risky move that I wouldn't recommend (the classic "do as I say, not as I do"). But it may help reduce some of the losses.
My April condor is faring well. I have had to roll up both the calls and the puts, but I left the May 680 calls in place as a hedge against a continued move upward. This has left this position almost perfectly delta neutral with a moderate sized positive theta to continue to drive profitability. The April 700 calls have a delta of 23 so we still need the May call hedges.
