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I was impressed with yesterday's strong bounce off of support and am also impressed with today's move right back down to those support levels. The markets opened up this morning and basically trended downward all day. Both the RUT and the SPX closed at or just above their support levels. RUT closed at $601 and SPX closed at $1080. Today's candlestick patterns are the classic bearish engulfing pattern or what is known as an outside day in the bar chart world. So after the market looked pretty solid yesterday after strongly bouncing off support, now it has driven strongly right back down to support. The key to watch for on Monday is definite break of these support levels.
My Nov iron condor is still in good shape with a P/L of +$2,600, delta = +$12 and theta = +$69. Hopefully, the consolidation of the past several sessions will continue and we can just sit and watch the time decay. But today's strong down move certainly has my attention.
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The markets opened in negative territory this morning and momentarily looked as though yesterday's shooting star candlestick was indeed an indicator of a trend reversal. But the indexes dropped, hit support, and started a steady climb upward that accelerated for the last two hours of trading to end the day with all of the stock indexes up across the board. RUT ran up $8 to close at $613 while the SPX closed at $1093, an increase of about $12.
My Nov iron condor on RUT now stands at a P/L of +$2,460, position delta of -$8 and position theta of +$84. My put spreads are now about two standard deviations OTM and the call spreads are about 1.5 standard deviations OTM. The iron condor spread is my "bread and butter" trade and my trading record now stands as:
June: +$4,600 or 29%
July: +$1,400 or 10%
August: -$810 or -5%
September: +$1,630 or 6%
October: +$715 or 6%
November: +$2,460 or 15% (still open)
Given the severe market volatility of the past several months, I am particularly pleased with this track record. Iron condors are easy trades during slowly trending or sideways markets, but 2008 and 2009 have been extremely challenging for all delta neutral traders. If you can successfully trade iron condors in this environment, I would dare say you could trade them anytime.
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The markets were in negative territory almost all day. Many expected the good earnings announcements, led by Apple, to lead the market higher, but that didn't prove to be true. My view is that the earnings announcements have generally been considered as good or exceeding expectations based on profit growth rather than revenue growth (Apple was a notable exception). Companies have aggressively laid off workers and cut costs, resulting in gains in profitability, but those gains are temporary. When you couple this realization with some profit taking after an exceptional run upward for the past few months, some sideways consolidation is the best we can expect. But this presents a much more favorable market for our delta neutral trades.
RUT closed down about $9 to $613 while the SPX dropped $7 to $1091. The RUT is struggling to break through $625 while the SPX can't break $1100. My Nov RUT iron condor (20 contracts of the 520/530 puts and 680/690 calls) stands at a P/L of +$2,220, position delta = -$15 and theta = +$89. Perhaps Nov will be a nice boring month for us condor traders - it's about time! However, I still think there is a good chance of some unexpected economic data scaring this market, so keep your contingent stop loss order in place to close your put spreads in case of a sudden drop.
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The markets traded up and then basically sideways throughout the day and then did an abrupt about face with about one hour left in trading. It is hard to say what triggered the sell-off. Some suggested it was the downgrade of Wells Fargo that started all of the financials trading downward; some suggested the dollar hitting new lows was starting to worry some traders. The RUT dropped $8 to close at $605, just above support at $600. Similarly, the SPX dropped about $10 to close at $1081, just above its support at about $1080. Both of the SPX and RUT charts displayed a shooting star candlestick pattern today, often suggesting an imminent reversal of an up trend. In this case, we would want to see the SPX and RUT solidly break their support levels tomorrow to confirm that reversal.
My Nov iron condor is almost exactly delta neutral with a P/L of +$1,780, delta = +$2, and theta = +$108. Watch the market tomorrow morning carefully. I trust you have your contingent stop orders all in place??
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The bull market is still intact, in spite of all of us doubting Thomases. The Russell 2000 Index (RUT) closed up about $6 to $622 while the S&P500 Index (SPX) closed up about $10 at $1098. RUT had a strong run upward this morning, but it stalled at the resistance level set earlier this year at $625. RUT has been trading just below $625 for four sessions now; it is looking for some news sufficient to break through $625. SPX broke through its resistance a few days ago and now appears to be struggling with the $1100 mark; for three sessions, it has bounced off of that level; today it broke above by a thin dime just for a couple of minutes.
As I am writing this blog, AAPL has not yet announced its earnings, but the weak price moves on AAPL Friday and then again this morning caused me some concern so I closed my AAPL double calendar for a loss of $850. My Nov iron condor stands at a P/L of +$1900, delta = -$36 and theta = +95. I will begin to look for opportunities to position my Dec condors within the next week to ten days.
