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After Thursday's strong down day, one might expect Friday's market to be up; at least, that has been a common pattern the past six weeks or so. Although Friday started out in the red, trading slowly climbed all day and had a final strong push during the last thirty minutes of trading. RUT closed up over $6 at $611 while the SPX closed at $1102, also up $6. Trading volume on the NYSE was the highest all year; normally, I would take that as a very bullish sign, but at least some of that volume was related to various options expiring. Positive earnings announcements from ORCL, RIMM and others certainly helped the market, but it seemed that the dollar giving back most of Thursday's gains did more for the market than anything else.
Friday marked the official end of my Dec iron condor on RUT as my 500/510 put spreads expired worthless to leave me with a gain of $2,450 or 15%. It is worth noting that this was not an easy gain; we had five adjustments and/or rolls during this trade. By contrast, my Jan 510/520 and 650/660 condor is now up $1,640 with 27 days to go and no adjustments whatsoever. The short term Jan iron condor at 570/580 and 630/640 stands at a P/L of +$500, delta = -$45 and theta = +$65.
Next week brings several economic announcements: GDP, home sales, personal consumption data, and the MI consumer sentiment index. Barring any surprises in these announcements, next week is likely to be slow and lacking clear direction, given the holiday and fewer people on the trading floors.
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Greece's debt problems appeared to be fueling a flight to safety out of competing currencies and to the dollar. The relationship of stronger dollar and weaker stock prices appears to be still holding. However, unemployment claims moved up a bit from last week and that didn't help the mood on Wall Street. RUT traded downward most of the day, but bounced off $600 and closed at $605, a loss of about $7 on the day. The area of $595 to $600 appears to be holding up well. By contrast, the SPX steadily traded down all day and closed down $12 at $1097, near its intraday low of $1096. Trading volume was up significantly, plus we didn't have buyers strongly entering the market late in the day as we have on recent down market days. That could be a warning sign.
This drop in RUT helped both of my Jan iron condors. The 510/520 and 650/660 condor stands at a P/L of +$1,940 with delta = -$61 and theta = +$114. The 570/580 and 630/640 condor I established a few days ago stands at +$300, delta = -$25 and theta = +$71. Trading the iron condor is emotionally challenging. At times like the past month, it is simply boring, while it can be a roller coaster ride as it was this summer and early fall. You must clearly have your trading rules in mind (preferably written down) and not allow yourself to manufacture new trades when bored or panic when the market moves against you and not make the adjustments in a timely fashion.
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The market opened on a down note this morning, based on the increase in the November Producers Price Index, and a surprising drop in the Empire State Manufacturer's index, a survey of New York state manufacturers. The Empire index came in at 2.6 for December, down from 23.5 in November. This is the lowest value since July. But the market shook that off and recovered most of the losses through the balance of the day, but then sold off to about where the markets opened. RUT closed at $606, down $3 while the SPX closed down $6 at $1108.
It appears to me that the bulls are not sufficiently concerned about this market to sell and take their profits off the table, but they aren't willing to continue buying either. A significant piece of economic data is required to tip this market one way or the other. Next stop: the FOMC announcement tomorrow.
My Jan condor on RUT at 510/520 and 650/660 stands at a net profit of $1,180 with delta = -$84 and theta = +$118. My latest RUT condor at 570/580 and 630/640 stands at a P/L of -$50, delta = -$36 and theta = +$63.
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The large cap indexes opened up in positive territory this morning and traded sideways until the FOMC announcement this afternoon. Then a sell-off began and erased most of the gains. The SPX gained $1 on the day to close at $1109. But the small and mid cap companies in the RUT index behaved more positively and gave back less of their early gains. RUT closed up $5 at $611. The FOMC conformed expectations for continued low interest rates but also said that most of the emergency lending support measures will end in early 2010. That served to strengthen the dollar which appeared to push the stock market lower. In any case, the same pattern remains: basically a sideways trading market with bulls and bears basically in balance.
My Jan 510/520 and 650/660 iron condor on RUT stands at a net profit of $1,480 with delta = -$79 and theta = +$118. The Jan 570/580 and 630/640 iron condor stands at a P/L of +$50 with delta = -$38 and theta = +$68.
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The markets opened in positive territory this morning on overnight news that Dubai World appears to have solved its debt liquidity problems, at least for the time being. And Exxon-Mobil announced its planned acquisition of XTO Energy this morning; this encouraged investors that the merger/acquisition business may start to resume. The dollar traded downward today, which probably helped stocks to trade higher, although that influence appears to be waning. The Russell 200 Index (RUT) traded up steadily all day to close at $610, an increase of over $9. Trade in the S&P 500 (SPX) was more choppy, but closed up almost $8 to close at $1114, a new closing high for the year (the year's high of $1119 was intraday).
The strong increase in RUT pulled the P/L of my Jan iron condor back a bit to +$940, with a delta = -$86 and theta = +$121; the delta of my short $650 calls is just under 16. I decided to add a new Jan condor on RUT with 10 contracts of the 630/640 calls at $2.55 and 570/580 puts at $2.10. This is a shorter term (31 days) iron condor with the spreads positioned much closer to the index (the calls are at 0.5 standard deviation and the puts are at 0.7 standard deviation). This is a more dangerous configuration of the iron condor and must be carefully managed; on the plus side, we should be in and out of this position much more quickly than our normal condors positioned out about 50 days or so. At the end of the day, this position stood at a P/L of -$100, delta = -$34 and theta = +$60. Traders are looking forward to the FOMC meeting later this week, but it is doubtful that they will make any moves that surprise the market. Of course, it is in precisely this complacent situation when any surprise has a huge impact.
