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The futures were flat early this morning but then a couple of key economic reports changed the mood. The consumer price index increased 0.3% (higher than expected and higher than Sept) and both new housing starts and new building permits were down for Oct, again lower than Sept. This took the futures into negative territory and the market opened lower. The dollar approached its lows of Monday, but unlike recent sessions, the stock market did not rally in response. The markets traded sideways to slightly lower all day. RUT closed down about $2 at $600 while the SPX was virtually unchanged at $1110. Both yesterday and today, the bears made runs at breaking the $1100 support level on the S&P 500, but both attempts failed and support held.

My Dec iron condor remains essentially unchanged with its P/L at -$760, delta = -$14 and theta = +$66. The delta of my short $630 calls remains around 24 so I am firmly "on hold" - I need the protection of the Jan $630 calls, so I can't sell them, but it is too early to close or roll the 630/640 calls. So we wait for the market to make its move.

The markets opened downward today, but within a couple of hours, they had regained most or all of those losses. Generally, it was a pretty slow uneventful day in the markets. RUT closed essentially unchanged at $602 while the SPX gained a dollar to close at $1110. I think it is significant that the SPX did not give back that $1100 milestone it crossed yesterday.

My Dec iron condor stands at a P/L of -$980, delta = -$20 and theta = +$58. This position is sitting "on the edge" in a sense. The Greeks look pretty good with a strong theta/delta ratio, but further movement upward will force my hand and necessitate rolling some of the those 630/640 spreads upward out of danger.

You may have noticed that it almost seems the market has been toying with me lately - I buy a long option for protection, then it pulls back and I sell the option and then it roars back at me. You will frequently find yourself tempted to think "someone out there" is out to get you. Don't! Every time you have that thought, double check your trades - are you following your rules? If so, everything is fine. If not, then use this as a "tough love" lesson from the market to strengthen your trading discipline. In general, the better you trade, the calmer your disposition will be. You are just following your rules and reacting to what the market gives you.

It was only Friday that I was talking about the market trading sideways in a range while consolidating earlier gains. Well, the market showed me! RUT ran up nearly $17 to close at $603, while the SPX broke through the $1100 resistance that I thought would hold it for a while; SPX closed at $1109. The dollar is now trading near its 52 week lows and that spurred a rally in both stocks and commodities. Gold hit a new high at $1143 during today's trading.

I was concerned I had removed the hedges on my Dec iron condor on RUT too soon Friday, and that certainly proved to be true. I bought three Jan $630 calls for $13.50 this morning. My condor now stands at a P/L of -$1,335, delta = -$14 and theta = +$62. I could blame this misstep on the extreme volatility of late, but the fundamental error I made was on Nov. 2 when I closed the 660/670 spreads and rolled down to 630/640. That move was too aggressive for such a volatile market. The theta/delta ratio is good for now, but further moves upward will force me to start rolling out of the 630/640 spreads.

The markets opened in slightly positive territory this morning and slowly gained throughout the morning in spite of generally negative economic news. The trade deficit for September was greater than expected, and that was followed by weak consumer sentiment numbers from the University of Michigan; but the falling dollar was enough to buoy the market. However, in the early afternoon, the negative news appeared to be taking its toll, but the bulls returned in the last hour of trading and recovered almost all of the lost ground. RUT closed up $6 at $586 and the SPX closed up $6 to close at $1093.

Early this morning, I decided to remove my Jan $630 call hedges (sold at $8.20 for a loss of $540). However, by the end of the day, my condor was nearly back to an area requiring adjustment. The condor now stands at a P/L of -$60, delta = -$64 and theta = +$124. The theta/delta ratio is pretty strong at about 2:1. It appears that the SPX will have difficulty breaking through $1100, so I am expecting the markets to trade sideways for a while here. This isn't too surprising after the strong rally of the past few months. A nice boring trading range would be welcome news for delta neutral traders.

Trading started off in the red this morning and never varied from that pace. The Russell 2000 Index of small caps was particularly hard hit today, dropping over $12 to close at $580. Meanwhile, the SPX dropped  a similar amount in absolute dollar terms, $11.27, but about half as much in percentage terms, to close at $1087. The dollar's strength again appears to be the impetus behind today's stock market weakness. Unemployment claims numbers were actually a little better than expected, but the federal deficit hit a new high at $176 billion and analysts were expecting $150 billion.

My Dec iron condor now stands at a P/L of -$20, delta = -$5 and theta = +$88. I still have the Jan $630 call hedges in place but the delta of the Dec $630 calls has dropped back to 16, so I may sell those call hedges tomorrow unless the market rebounds. The volatility of this market makes it very challenging to trade these delta neutral strategies.

The markets opened up strongly this morning; RUT ran to $597 before pulling back to close at $593 at the end of the day (up almost $6). The SPX actually broke through resistance at $1100 to $1105 but couldn't hold it and closed at $1098.51. As in recent markets, the stock trading was tied inversely to the strength of the dollar. The dollar traded lower this morning, but then strengthened. Gold hit a new record high of $1118/oz before pulling back.

My Dec iron condor on RUT now stands at a P/L of -$350 with delta = -$25 and theta = +$87. I have clipped a shot of this position's risk/reward chart below. Note the effect of the Jan $630 call hedges; the red line is today's risk/reward curve - follow it with increasing price gains on RUT. Do you see how this hedge allows me to stay with this position and allow RUT to run as high as $620-$630 and constrain my position losses to about $2000? The advantage of this type of adjustment is giving the market time to turn back or trade sideways and therefore a chance to salvage my position. So we wait and see.

Trading started in positive territory this morning, but within an hour, it had turned negative. The Russell 2000 Index (RUT) traded downward most of the day and recovered some during the last hour of trading but closed down at $587, just above the support level broken yesterday. The S&P 500 (SPX) also traded up initially and then downward all day. But the SPX regained all of its losses in the last hour to close virtually unchanged at $1093, just below the strong resistance at $1100.

My Dec iron condor was helped somewhat by the modest pullback on RUT to close with a P/L of -$10, delta = -$13 and theta = +$77. I still need the protection of the Jan $630 calls since my Dec $630 calls still have a delta of 20. It may prove difficult for SPX to break $1100 and RUT to break the resistance at $625 set with the double top in September and October. The markets may well trade in this range for a while. But this market has been proving everyone wrong of late, so be sure your contingency orders are in place.

News that the G-20 and Treasury Secretary Gaithner believe economic stimulus should be continued sent the dollar down and gold and stocks up today. Today's strong run upward stood in sharp contrast to the doldrums in the markets Friday. RUT ran nearly $12 to close at $592 while the SPX closed at $1093, up almost $24. RUT convincingly broke through resistance at $585 while the SPX is nearly at the $1100 level it could not break through a few weeks ago. Trading volume was up across the board, so today's move appears to be a convincing end to the correction that began in mid October.

My contingency orders kicked in early this morning to purchase two Jan $630 calls at $11.00. Before that adjustment, my Dec condor stood at a P/L of -$460, delta = -$76 and theta = + $112. At the close, the position was at -$250, delta = -$17 and theta = +$75. The adjustment protected the overall position P/L and cut delta way back, while not sacrificing too much theta. The theta/delta ratio is actually stronger after the adjustment. Now we wait to see if SPX can break $1100 - that would be very bullish.

The unemployment report of 10.2% was greater than the 9.9% expected and caused a minor pullback in the markets at the open, but buyers quickly pulled it back up. Although the market basically traded sideways all day, I think this shows considerable buying strength for this market. RUT closed essentially unchanged at $580 and the SPX closed up about $3 at $1069.

My Dec iron condor on RUT now stands at a P/L of -$100, a position delta of -$42 and a position theta of +$103 - solid greeks with theta/delta > 2:1. When the market turned bullish early this morning, I entered a contingency order to buy protective Jan $630 calls if RUT broke through resistance at $580-$585 (I set the trigger at $587). Because of my aggressive rolling down of the call spreads early this week, I now have a fairly aggressive iron condor position at $500/$510 and $630/$640. We still have a lot of time left in this trade at 41 days. Stay tuned.

CSCO's strong earnings report appeared to energize the market and it opened strong this morning but the surprise (to me at least) was that it continued its steady upward march all day long.  I expected some traders to take profits toward the end of the session, given the upcoming unemployment report in the morning, but everyone appears confident that unemployment will rise only a little to 9.9% and that is apparently considered further confirmation that the worst is behind us. RUT ran up $18 to close at $581 while the SPX closed at $1067, up a little over $20. RUT is just entering a resistance level at about $580 to $585 while the SPX will be running into resistance at about $1070. If they break those levels tomorrow, then this correction may be over; if you look at the peak to trough move on the SPX, it was about 6%. Most market technicians would expect a move of about 10% for the normal correction...

My Dec $510 puts are out of the woods for now with a delta at 15. However, I may regret aggressively having rolled my call spreads down to 630/640 on Monday. The $630 strike feels a little too close after today's $18 run upward. A few days makes a big difference in this volatile market. My Dec RUT iron condor now stands at -$560, delta = -$43, and theta = +$104. Tomorrow should be interesting...