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The markets started the day on a positive note and the RUT and SPX traded up to their recent resistance levels, but then retreated after the Fed's Beige Book was released with virtually no positive news on the economy. But then the bulls tossed the Beige Book aside and drove the market into the bell with the RUT closing up over $10 to $586.40 and SPX closing at $1033.37. This leaves both indexes right at their resistance levels; it will be interesting to see if the bulls can drive through to higher highs.
My Sept iron condor (20 contracts of the 480/490 puts, 10 contracts of the 500/510 puts, and 30 contracts of the 620/630 calls) stands at a P/L of +$2,780, delta =-$76, and theta = +$240; theta is really gaining as we roll down to the last week of these options. The Oct iron condor (15 contracts of the 460/470 puts and 15 contracts of the 640/650 calls) has a P/L of +$400, delta =-$45, and theta = +$65. The Oct $640 calls stand right at one standard deviation OTM with a delta of 12. I will adjust this condor if the delta of this short call exceeds 17-18.
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The markets continue to have a bias to the upside, although the pace has moderated significantly. The Russell 2000 Index (RUT) closed up at $576.38, nearing its resistance level of $580-$589, set the last week of August. The Standard and Poors 500 (SPX) closed at $1025.39, near its resistance level of $1035-$1039.
My Sept iron condors are in excellent shape as we wind down toward September expiration with P/L = +$3,210, delta = -$37, and theta = +$137. The Oct condors are much farther from expiration, but are in good shape with a P/L = +$625, delta = -$29, and theta = +$61.
I tried an experiment this holiday weekend. I recorded the closing prices for all of the options in my September and October condors on Friday and then adjusted for the RUT price change (delta) and IV change (vega) this morning and compared those adjusted prices to the market prices. If the market makers had completely adjusted their prices Friday for the three days of time decay, one would expect my adjusted prices to be high since I had not accounted for any time decay. As it turns out, it is about half and half (based on one rough set of data); it appears that most of the time decay was already taken out of about half of these options, but not all of the decay was accounted for in about half of the options. So the lesson is this: if you are establishing any positive theta positions before a long holiday weekend, put them on early Friday at the latest; Thursday is probably better. By Friday afternoon, much, but probably not all, of the time decay has already been factored in the option price.
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The markets opened and traded down early today and then spent most of the day trading choppily and mostly sideways. But the bulls came to the floor in the last hour and pushed all of the major indexes higher. The Russell 2000 Index traded as low as $552 in the morning and closed at its high for the day, $562.49. The Standard and Poors 500 (SPX) traded in a similar pattern and closed within a quarter of its high for the day at $1003.24. Gold closed at a six month high of $998.
Early in the day, the talking heads attributed the sideways trading to the market waiting for the unemployment numbers tomorrow morning. If that was true, someone must have decided those numbers are going to look better than expected, given the strength of the buying late in the day. The patterns of trading this week seem to suggest a fundamentally sound market and just some healthy consolidation occurring. However, I think most market players are still a little on edge from the extreme volatility of the past year. So some surprise, like a big jump in the unemployment number tomorrow, might push this market off the cliff. However, in the absence of that panic scenario, my iron condors will continue to generate profit as we consolidate sideways. My condors are in excellent shape with the Sept position at a P/L of +$2,290, delta = +$7 and theta = +$191. The Oct condor closed at a P/L of +$160, delta = -$14 and theta = +$66. So now we watch for the unemployment number and, barring no surprises, we enjoy a long weekend of time decay.
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The unemployment report surprised us with an increase to 9.7%, but this didn't faze the market. This market's resilience has surprised me over the past several sessions; it continues to shake off bad news and rally back from intra-day lows. RUT and SPX both closed up at $571 and $1016, respectively. However, the trading volume was low today going into the holiday weekend, so it is hard to have much confidence in one's conclusions here. Just reading the chart leads one to believe the dangers to delta neutral traders remain on the top side; however, I still have not seen much to make me optimistic about this economy. But the market doesn't agree with me. So I will continue to play what the market gives me, even while I am scratching my head.
My Sept iron condor stands at a P/L of +$2,740, delta = -$17, and theta = +$162 - excellent numbers. The Oct iron condor still has 41 days left in it, so the numbers aren't as pretty: P/L of +$550, delta = -$16, and theta = +$57. But they aren't bad. The theta/delta ratio is still very strong at 3.5.
With my positions sitting pretty, it will be easy to relax this holiday weekend. I hope you get to spend some quality time with family and friends.
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The markets didn't do much of anything today. RUT closed down a couple of dollars to $556 - still holding at support around $550. The SPX closed down $3 to $995, still in its support area; look at the SPX chart for Aug 4-14 and see how it held in the range of $992 to $1012 for several days; that is the support level I'm watching. A strong breakout at higher volume below $990 would be of concern; otherwise, this market is just consolidating after a huge rally. And we may be seeing a bit of a slowdown before the holiday weekend.
My condors are loving this consolidation - delta stays neutral while positive time decay works in my favor. The Sept condor stands at a P/L of +$1920, delta = +$32, and theta = +$185, while the Oct position stands at a P/L of +$70, delta = -$9, and theta = +$63.
