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Pending home sales for November decreased 16%. This news eclipsed more favorable news of factory orders increasing 1.1% in November. The markets traded in choppy, sideways fashion all day. RUT closed down $2 at $638, while the SPX closed at $1137, up $4. Trading volume remains below the averages of 2009, although up almost 50% from the past couple of holiday weeks. Most of the talking heads appear to be predicting a bullish 2010, but it appears to me that the economic news will most likely continue to be positive, but indicative of a slow recovery - not the kind of news that is likely to fuel a strong bull market run.
I began my February RUT iron condor position today with 10 contracts of the 690/700 calls for $1.10 and 560/570 puts for $0.86. I will add to that position over the next few days, perhaps even into next week.
My low probability condor for January is still underwater, but the large positive theta is beginning to pull it up; the P/L is now -$730 with delta = -$69 and theta = +$151. The high probability condor has now moved slightly into the black at +$40, delta = -$137 and theta = +$302. Barring any strong price moves, the $450/day of theta decay will continue to help these positions.
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The markets opened strong on this first trading day of 2010 and never looked back. Weakness in the dollar and the surprisingly strong report on manufacturing from the ISM for December fueled the run today. Similar manufacturing reports from Europe indicated renewed strength there as well. All of this data seemed to build on the bullish Chicago purchasing manager's report last week. The SPX set a new 52 week high at $1133 and RUT rose over $12 to close at $638.
Our short term iron condor for Jan on RUT stands at a P/L of -$790, delta = -$54 and theta = +$140, while the longer term Jan condor stands near breakeven at -$80, delta = -$107 and theta = +$280. Our short $660 calls have a delta of 15, so we are nearing adjustment territory if this meteoric rise continues.
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The markets opened up in the red this morning and traded sideways and downward throughout the day. RUT was down as much as $5 at one point in the day, but rose over $4 in the last thirty minutes of trading to close unchanged at $633. SPX traded in a similar pattern, also trading upward strongly in the last thirty minutes to close up less than a dollar at $1126. The Chicago Purchasing Managers Index reported a value of 60 today, the highest level of this index since 2006. Surprisingly, it didn't move the market. While this market appears to have significant buying support that serves to hold it up in the face of selling pressure, there isn't sufficient conviction to really drive the market higher. Trading volume has continued to be at the low levels we saw last week, so we may not get a feel for the true nature of this market until after the New Year.
My low probability iron condor on RUT closed at a P/L of -$1,070, delta = -$39 and theta = +$106. The high probability RUT iron condor stands at a P/L of -$640, delta = -$78 and theta = +$213. Our combined theta of over $300 will steadily pull us into profitability, assuming the indexes continue to trade sideways or even downward a bit. So on we go to the New Year's celebration.
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The markets opened down a little bit and traded very flat all day. Trading was at very low volume levels due to the holidays, but it appeared many traders wanted to take their profits before the year ended. The Russell 2000 Index (RUT) dropped over $7 in the last 30 minutes to close at $625, down $8 for the day. The S&P 500 (SPX) traded in a similar fashion, closing at $1115, down $11 for the day, with about $8 of that loss in the last few minutes of trading.
This down move was helpful for my condors as we move into the last two weeks before expiration. My short term (31 day) condor on RUT stands at a P/L of -$1,050 with a position delta of -$31 and a position theta of +$114. The long term (51 day) condor stands at a P/L of -$600 with a delta of -$62 and a theta of +$228.
Thanks to each of you for your support this year. You have my best wishes for both a happy and prosperous 2010.
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Markets opened trading sideways and basically traded choppy and sideways all day. Selling during the last 30 minutes of the day took the markets down; in the case of the SPX, this late selling resulted in it closing at its low for the day, $1126, down $2. RUT held up a little better, closing at $633, down less than a dollar.
My short term (31 day) iron condor closed at a P/L of -$1,050, delta = -$41, and theta = +$97. Some would call this a low probability iron condor and there isn't anything wrong with that term. But positioning of iron condors is a continuum and each extreme has its pros and cons. My longer term (51 days) or high probability iron condor stands at a P/L of -$600, delta = -$81 and theta = +$195. We are down to 16 days to expiration and theta is beginning to really kick in for us. RUT's push through resistance during the past week hurt both of these trades. But they are still well positioned to finish in the black. Remember, when you are trading the iron condor, focus on minimizing the losses; the gains will take care of themselves.
