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Credit problems in Dubai sent Asian and European markets tumbling yesterday while we were having turkey with our families. Our markets gapped down at the open today, recovered a little bit and traded sideways for the balance of a shortened trading day. The big question on everyone's mind: will the markets continue down Monday or will today's drop be considered an over reaction? Either the problems in Dubai will be considered more isolated and the market will recover or analysts will see Dubai's problems as precursors to broader global credit issues and the market may correct even further. RUT dropped almost $15 to close at $577 while the SPX lost $19 to close at $1091.
My Dec iron condor on RUT stands at +$730, delta = -$10 and theta = +$137. This market pullback has brought the index almost equidistant between the short strikes. My RUT Jan iron condor stands at +$80, delta = +$11 and theta = +$64. Now we wait for Monday's response. Are your stop losses in place?
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A surprisingly positive report of new home sales for October plus a 52 week low for the dollar kept the markets in positive territory today, but just barely. The low volume of trading typical preceding a holiday continued today and will likely also characterize Friday's short trading session (trading will close at 1:00 pm ET). The RUT traded mostly sideways today and closed essentially unchanged at $592, while the SPX made a modest $5 gain to close at $1111, just shy of its record $1113 for 2009.
My Dec iron condor now stands at a P/L of +$630, delta = -$84 and theta = +$122. The put spreads are now over two standard deviations OTM and the calls are right at one standard deviation OTM. The Jan iron condor on RUT stands at a P/L of -$100, delta = -$32 and theta = +$81. Holiday weeks are wonderful for income generation traders.
I wish each of you a wonderful Thanksgiving with your families. We have much to be thankful for.
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The S&P futures signaled a strong open early this morning, based on a weaker dollar and bullish trading in the Asian and European markets. Stocks broadly rose at the open and the strong start was further fueled by a surprisingly strong existing home sales report; Oct sales jumped 10.1% to 6.1 million sales (5.7 million were expected). But shortly after that report, the market softened and traded slowly downward the rest of the day, but strong gains were retained. RUT closed at $595, up over $10 and the SPX closed up almost $15 at $1106.
My Dec iron condor on RUT now stands at a P/L of -$110, delta = -$85 and theta = +$139. The theta/delta ratio is weakening, now below 2:1. My short $630 calls are standing at a delta of 16, well below where I would pull the trigger on an adjustment. In addition, there are many technical signs that this market is overbought, plus trading during this holiday week isn't likely to move strongly in either direction. So I am not inclined to worry about this position at this point. Market trading volume was below average today and will likely diminish as the week progresses. I will be looking to establish my January iron condor tomorrow to take advantage of the holiday.
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The markets opened up weak this morning and spent most of the day slowly making up ground, ending the day essentially unchanged. The Nov Consumer Confidence Index came in greater than expected and was higher than October as well, but that didn't have much effect on the market. The release of the FOMC minutes from the last meeting did not generate much response either. In general, the market seemed to be on vacation in advance of the holiday. RUT closed down $2 at $593 while the SPX was essentially unchanged at $1106.
I initiated my Jan iron condor today by selling 20 contracts of RUT call spreads at $650/$660 for $1.07 and selling 20 contracts of RUT put spreads at $510/$520 for $1.10. Plus and minus one standard deviation was $532 to $646 and I gave myself a little more safety margin on the bottom side. We brought in a total credit of $4,340 and have $15,660 at risk. I placed my contingency stop loss order to trigger at values of RUT < $543. At the close of trading today, this position stood at a P/L of -$160, delta = -$33 and theta = +$79. My Dec RUT iron condor stands at a P/L of +$530, delta = -$79 and theta = +$123. In some ways, this type of slow choppy market is boring, but it is wonderful for income generation options traders.
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A strong dollar and a disappointing earnings report from Dell started trading this morning on a negative note that continued through mid-day. The buyers began to pull the indexes back up during the last two hours of trading, but didn't fully recover all of the losses. RUT closed almost unchanged at $585, down about a dollar, while the SPX closed down $4 at $1091. Traders continue to worry about a significant correction, but the appearance of buyers during the last couple of hours of trading both yesterday and today is encouraging. However, this market is definitely nervous - be sure your protective contingency orders are in place.
The $680/$690 calls from my Nov iron condor on RUT expired OTM today, confirming our $2,060 gain (13%) for November. My Dec RUT iron condor is in pretty good shape with a P/L of -$50, delta of -$60 and theta of +$125. January options have 55 days to expiration, so we will begin to look for the opportunity to initiate our Jan iron condor next week.
