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Obama's next move to shore up his political position after the embarrassment in MA was to declare war on the banks; after all, it worked for Jesse James, didn't it? No one likes banks. The news sent the financial stocks and the rest of the market plunging this morning, and unlike other recent sell-offs, the bulls didn't come to the rescue late in the day. News of rising new unemployment claims fed concerns that the economic recovery is far from a certain reality. RUT broke its support level at $633 and closed at $628, just above the next support level of $625, established back in September and October (the double top). SPX traded similarly and closed down nearly $22 at $1116.
My Feb 560/570 and 690/700 iron condor now stands almost perfectly delta neutral with a P/L of +$1,800, delta = +$9 and theta = +$84. I established the beginnings of my March iron condor today with 10 contracts of the 560/570 put spreads for $1.27 and 10 contracts of the 690/700 call spreads at $1.11. Over the next several days I will look for an opportunity to add to the March position. More and more of the talking heads on CNBC are talking about a possible correction, but I have found it best to ignore them and simply follow my trading plan for how I enter my iron condor positions. My only concession to all of the talk of corrections is to scale into my March position with ten contracts today and add more later.
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The markets opened down today based on a stronger dollar and some reported bank lending policy changes in China. But bullish sentiment is still predominant. Pullbacks such as today's are viewed as buying opportunities. Support levels have been established over the past couple of weeks for RUT at about $633 and SPX at about $1130. RUT hit $633 at about 11 am this morning and then traded steadily higher to close at $640, down a little less than $10 for the day. The SPX dipped below its $1130 support level twice today, but buyers came in and traded the SPX higher from about 1:15 pm into the close at $1138, down about $12 for the day. However, the predominance of bullish sentiment is of concern; often that is a sign of a market top. But one of the advantages of being a options income trader is that I don't have to predict the market's turns.
My Feb iron condor stands at a P/L of +$2,020, delta = -$17, and theta = +$82. Assuming no big changes in the market tomorrow, I will be establishing at least a portion of my March iron condors tomorrow.
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The complete record of the trades in the account being traded in this blog from May 29, 2009 to date is displayed below. The account began with $40,238 and today's balance is $55,427, a total gain of 38%.
Dr. Duke practices what he preaches.
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Apparently the bulls came back from the long weekend ready to buy in earnest. Citigroup's earnings report wasn't very positive in any respect: current quarter losses and a pretty pessimistic outlook. IBM reported earnings that beat expectations with a 9% increase, but this was with only a 1% increase in revenue growth - earnings delivered via cost cutting, not a sign of healthy growth. But the bulls were not to be dissuaded; they took the S&P 500 to new 52 week highs of $1150, up over $14 today. The Russell 2000 index (RUT) also closed at a new 52 week high at $649, up over $11. The previous highs were set last Thursday at $1148 and $646, respectively. These new highs also came in the face of a stronger dollar, a marked change from recent months. All this euphoria worries me.
My Feb iron condor stands at a P/L of +$1,380 with a position delta of -$62 and theta of +$106. The delta of the $690 calls = 11, so we are not yet close to adjusting, but this market seems pretty strong. But we trade what we see, not what we expect.
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Intel and J P Morgan reported better than expected earnings last night, but that didn't seem to be enough for the markets today. The Consumer Price Index only increased 0.1% in December and the Consumer Sentiment Index was essentially unchanged. So the mystery is why did the profit taking take hold today? Trading volume was over 1.4 billion shares on the NYSE, but option expiration probably accounts for much of that volume. The markets opened down and traded down until just before noon, when buyers returned to the market and recovered some of the losses. RUT closed down $8 at $638 while the SPX dropped $12 to $1136. However, today's move leaves RUT and SPX firmly within the sideways channel they have been in since the last week of December, so a new correction or downward trend has not been defined by today's move.
My Feb RUT iron condor now stands at +$1,080 with a position delta of -$30 and theta = +103. Next week will be filled with earnings announcements, so it will be interesting to see if the market has any strong reactions as those play out.
