Do you know any trading coaches who publish the results of their trades daily? Dr. Duke posts the trading track records of his Flying With The Condor™, Conservative Income, Dr. Duke's Trading Group, and The No Hype Zone Newsletter services in the free downloads section of this web site. If you have questions about any of the trades, Ask Dr. Duke.

Dr. Duke practices what he preaches! You are entering the "No Hype Zone"!


The market opened strongly this morning, buoyed by a better than expected home price report, but 10 am brought a disappointing consumer confidence report and that threw cold water on the trading for the balance of the day. However, the good news is that the market found support rather easily and didn't give up any significant losses. So the underlying bullish trend appears intact. RUT closed down about $3 to $610 and the SPX closed down about $2 to close at $1061.

This sideways market action is great for my iron condors and they are almost unchanged from yesterday: my Oct condor stands at a P/L of -$680, delta = -$19 and theta = +$125; both short options are greater than one standard deviation OTM. The Nov condor stands at a P/L of -$140, delta = -$43 and theta = +$78. The short $680 call now stands just inside one standard deviation with a delta of 13. This trade still has 51 days until expiration so we cannot tolerate much of an upward move in RUT over the next week, or we will have to adjust our call spread position.

The markets traded up strongly this morning and then held pretty steady throughout the day. Financials and technology led the charge early and the financials ended the day up over 2.8%. However, trading volume was low due to Yom Kippur. Tomorrow brings the potential for higher trading volume, the consumer confidence report and the housing price index data. We'll see if that data dampens any of the merger euphoria that drove today's markets. A strong day like today on greater than average trading volume would be very bullish.

RUT closed at $613 and the SPX closed at $1063. My Oct condor stands at -$870, delta = -$23 and theta = +$129. The short $660 calls are now well outside of one standard deviation at $651. That is comforting but these feelings of confidence can be fleeting. My Nov condor stands at a P/L of -$240, delta = -$40 and theta = +$77. The delta of the $680 call is up to 14, nearing our adjustment zone. So for now, we just watch and wait.

Today was another dismal day in the markets, but the losses were relatively minor. RUT closed at $599, down about $3; SPX closed at $1044, down about $6. RUT was down as far as $596 before afternoon buying pared some of the losses. Let's consider RUT as we look at the "correction or consolidation" question (the same analysis holds for the S&P 500). If RUT were to drop back to its closest support level at about $585, that would represent a 6% drop from recent highs. Most market observers would say a 10% drop constitutes a correction. Of course, this isn't a science - maybe 6% will constitute the correction this time. But the conclusion is clear: so far, we have some minor consolidation going on, nothing too alarming. Next week is loaded with economic reports: consumer confidence, ADP payroll, final Q2 GDP, Chicago PMI, etc. Assuming no huge surprises in any of those reports, we will probably just muddle along here for a while.

My Oct condor now stands at P/L of -$1,100, delta = +$20 and theta = +102 (great theta/delta ratio, but unfortunately, this trade is badly wounded as it limps home). Our Nov condor is barely out of the gate but is in good shape so far with P/L of +$20, delta = -$13, and theta = +$68. The trades I publish here in my blog are in one $50k account, and it is worth noting that you can also manage a larger account containing several trades with the Greeks just as we have with these individual condors. This overall account stands at a P/L of -$685, delta = +$17, and theta = +$147. So we come to the same conclusion either way we look at the trades - everything is fine; no adjustments are necessary. We are just watching the time decay.

The sellers returned to the markets this morning and spurned the good news of lower initial unemployment claims and lower continuing unemployment claims. However, the decline in existing home sales took the market by surprise and that may have accelerated profit taking. RUT dropped about $12 to $602 and the SPX dropped about $10 to $1050; both indexes are well above their nearest support levels, so I think the bullish bias to this market continues. All of the major indexes traded down all morning, but then strengthened a bit in the last hour of trading.

I established the call spreads for my Nov iron condor this morning as the market was dropping, selling 20 contracts of the Nov 680/690 calls for $0.86. I then watched to see if the buyers would come back into the market, and when that happened late in the day, I sold 20 contracts of the 500/510 puts for $0.87. The range for plus or minus one standard deviation was $538 to $664. My resulting position is somewhat bearish with a delta = -$21 and +$75 in theta. IV is skewed with a value of about 39% for my 500/510 puts versus about 24% for the 680/690 calls. If I had placed my put spreads closer to one standard deviation OTM, my short puts would have been starting out with pretty high deltas around 15-16, meaning I would be adjusting the position with only a small move downward in RUT tomorrow. Thus, I ended up with a bearish leaning condor even though I ideally wanted it to be delta neutral.

In the meantime, this downward move of the past couple of days has positioned my Oct condor nearly delta neutral at +$15 with a large positive theta of $106. However, this position is still well underwater at about -$1,200 because our adjustments have reduced our profit potential and we need a lot of time decay to get us into the black.

The markets were buoyed by the FOMC announcement this afternoon. The Fed reiterated its observations that economic activity has improved, but, perhaps more importantly, said they intend to leave the fed funds rate at very low levels for some extended period of time to stimulate the economy. That boosted the markets. But it didn't last long before profit taking ensued. However, look at the charts. Both RUT and SPX simply closed down at the bottom of the consolidating range of the past few sessions. Therefore, there is no sign of a correction or change in trend direction here as yet.

This sideways and now slightly downward trading has been helpful for my Oct iron condor. The delta of my short $660 calls had dropped back to 14 this morning (closed at 12), so I sold my Nov $640 call for $16.10 ($450 gain). The position now stands at a P/L of -$1,385, delta = -$40 and theta = +$115. Our theta/delta ratio is back to a healthy neighborhood, but our wounded condor only has a maximum profit potential of $745 at this point. He's limping with 22 days to go. But trading the iron condor successfully is all about salvage operations - if you can salvage a small gain or even a small loss in the "bad" months, and take the gains in the "good" months, you can trade this strategy profitably. The key is learning to consistently manage the risk.

Today's market traded generally sideways to slightly higher. All of the broad indexes closed modestly higher, but off of their intraday highs. The pattern continues to look like a classic consolidation or base formation after a strong run upward. What should be encouraging to the bulls is the fact that whenever the market has shown any weakness intraday for the past several sessions, the buyers have returned to the table and held the broad market averages near their highs for the year. RUT closed at $621 while SPX closed at $1072.

I find it ironic (and a bit frustrating) that I have positioned my condors with extra safety margin to the downside for the past several months (negative delta), but my threats have come from the top side! I think I will position Nov with a delta neutral posture - the charts and technical indicators are pretty consistently bullish, but my emotions still worry about the other shoe dropping on the economy.

I closed the remaining eight $640/$650 call spreads this morning in my Oct iron condor. I paid $2.70 to close them and waited until the market ran up a bit this afternoon before rolling those eight contracts up to $660/$670 for $1.25. I still have the Nov $640 call hedging my top side. My short $660 calls have a delta of 16, so I still need that hedge. I considered adding one more long call today, but it would have reduced my position theta too much. At the close, the Oct condor stood at a P/L of -$1,685, position delta of -$16, and position theta = +$96.

The markets were generally under selling pressure most of the day with few exceptions in the biotechnology area. This isn't too surprising given the strength of the upward moves over the past couple of weeks. RUT closed at $616 and SPX closed at $1065, both a long ways from their nearest support levels. That suggests to me that the basic bullish character of the market has not changed; it is just pausing and consolidating a bit.

My Oct iron condor is basically unchanged at a P/L of -$1,285, delta = -$25 and theta = +$99. I'm just sitting on the fence here; if the RUT trades upward, I'll close the remaining 640/650 calls and sell my long Nov 640 call. If it trades sideways or downward, the position will strengthen and I will sell the Nov call when it starts to lose money. It may be a little boring, but most of the time is spent waiting on time decay when you trade income generation strategies. The trick is to watch it closely so that you adjust promptly when needed, but don't get impatient and trade just out of boredom.

Today's S&P quarterly rebalancing and quadruple witching options expiration stimulated a high volume trading day (over 2 billion shares traded on the NYSE) but the markets didn't really do much - mostly choppy, sideways trading. The Russell 2000 Index settled at $617.54 and closed today at $617.88. That translated to very little change for my Oct iron condor with a net P/L of -$1,631, position delta of -$25 and position theta of +$83. My Nov $630 call is hedging my remaining seven Oct 640/650 call spreads. If the RUT trades higher, I'll close or roll the remaining 640/650 calls; sideways or downward action may allow me to minimize the damage. Next week, I will start to look at establishing some November positions. A side note: RUT's implied volatility has been steadily declining since mid-June (as any of you who have been trading calendar spreads are painfully aware); it is now down to 27%, a 52 week low. That translates to my either having to accept smaller credits for my iron condors or making it necessary to choose strikes that are closer to the index price. Of course, if you position your strikes based on a standard deviation calculation, that includes that adjustment. But declining IV helps my wounded Oct iron condor.

Many market observers have been waiting for a pullback (me included) and even though the markets slowed a bit today, it wasn't much of a pullback. RUT closed down about $2 at $615.47, not much of a net change. SPX closed down about $3 at $1065.49. Pulling back to a support level in either index would require much larger price drops. If you look at the RUT chart over the past year, the nearest support level is around $585 to $590 (I don't believe in citing overly precise support and resistance levels as some do; the reality has a bit more "fuzziness" associated with it). Actually, after my mistake in not closing my Sept $620 calls earlier this week, I expected the RUT to drop a lot today - that had a certain perverse logic.

My October iron condor position remained unchanged today at a P/L of -$1,724, delta = -$20, and theta = +$83. My theta/delta ratio is strong. I still have 8 contracts of the $640/$650 calls that are in trouble, but the one long Nov $640 call is hedging that position well. My rolled $660 calls are in the "red zone" at a delta of 16, whereas my rolled short puts at $550 are fairly comfortable at a delta of 11. Further strong moves upward will force me to close the $640/$650 calls at a minimum and look for a reasonable credit at $680/$690, but we may be getting too close to expiration for that (rolling to the current $660/$670 may be too dangerous).

This market continues to amaze me. Nearly any technical indicator you may follow would suggest this market is severely overbought, but it just keeps making new highs. My trading today illustrates a common rookie mistake (to my embarrassment). I have been preoccupied with cleaning up the mess from the hackers' attack on my web site for the past few days. I should have closed the 620/630 call spreads in my Sept iron condor Monday or Tuesday, but I closed them first thing this morning, and gave back a lot of profit. The lesson here is to stay focused; I had become complacent, thinking my Sept condors were "in the bag" and then was distracted. Iron condors are dangerous animals and need to be treated with respect.

I closed 30 contracts of the Sept $620/$630 call spreads in the first hour of trading this morning for $0.72. I will allow my 10 contracts of $500/$510 puts and 20 contracts of $480/$490 put spreads to expire worthless. That will result in a net gain of $1,630 or 6.4% on capital at risk. I spent $340 on the put hedge early in the trade and $570 on the call hedge later in the trade; those are the "insurance" premiums. But the failure to close the call spreads earlier cost me at least $1,000.

I decided significant adjustments were in order for my Oct iron condors today. You may recall I have 15 contracts of the $460/$470 puts and 15 contracts of the $640/$650 calls with one Nov $640 call as up side hedge. Today I closed 7 of the $640/$650 call spreads for $2.50 (a loss of $1,120) and rolled them to $660/$670 for $1.05; I also closed all 15 of the $460/$470 puts for $0.20 (a gain of $750) and rolled them to $540/$550 for $0.70. I left the Nov $640 call as protection for the upside. This leaves my Oct position with a maximum potential gain of $2,385, delta = -$27 and theta = +$76. These are tough markets for delta neutral traders. You must stay on your toes and adjust promptly to remain in the game.