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Yesterday's buying continued today, setting new highs on the S&P 500 with a close at $1118. RUT closed near its highs for the year at $624.  Surprisingly, this occurred in the face of a stronger dollar and downwardly revised third quarter GDP data. On the other hand, November existing home sales were up over 7% from October. VIX hit a new low for the year as it dropped below 20, but trading volume was low, raising questions about the ability of this market to follow through.

These increases on RUT are beginning to squeeze my Jan iron condors with the P/L of my Jan 510/520 650/660 condor dropping to +$860 with delta = -$166 and theta = +$147. The RUT 570/580 and 630/640 condor stands at a P/L of -$230 with delta = -$80 and theta = +$72. Both condors will require adjustment if RUT moves up much more. So we will see what presents the market has for us this week...

Friday I predicted: "next week is likely to be slow and lacking clear direction, given the holiday and fewer people on the trading floors". Well, so much for that prediction! Today's markets were strong from the start, pulled back late in the day, but then resumed their upward gains into the close. Even more surprising, this stock market surge came in the face of a much stronger dollar, breaking recent tendencies for the market to trade inversely to the dollar. RUT gained over $8 to close at $619 and the SPX gained almost $12 to close at $1114. Tomorrow brings the GDP and existing home sales numbers. If I were venturing a prediction, I would expect the market to give back some of today's gains tomorrow - at least, that has been the pattern for the past six weeks or so. But positive economic news tomorrow morning may trigger additional buying.

My iron condors on RUT are performing well: the Jan 510/520 and 650/660 condor is now up $1,920 with position delta = -$116 and theta = +$113. The short term Jan iron condor at 570/580 and 630/640 stands at a P/L of +$200, delta = -$80 and theta = +$76. Neither condor is near any adjustment triggers.

After Thursday's strong down day, one might expect Friday's market to be up; at least, that has been a common pattern the past six weeks or so. Although Friday started out in the red, trading slowly climbed all day and had a final strong push during the last thirty minutes of trading. RUT closed up over $6 at $611 while the SPX closed at $1102, also up $6. Trading volume on the NYSE was the highest all year; normally, I would take that as a very bullish sign, but at least some of that volume was related to various options expiring. Positive earnings announcements from ORCL, RIMM and others certainly helped the market, but it seemed that the dollar giving back most of Thursday's gains did more for the market than anything else.

Friday marked the official end of my Dec iron condor on RUT as my 500/510 put spreads expired worthless to leave me with a gain of $2,450 or 15%. It is worth noting that this was not an easy gain; we had five adjustments and/or rolls during this trade. By contrast, my Jan 510/520 and 650/660 condor is now up $1,640 with 27 days to go and no adjustments whatsoever. The short term Jan iron condor at 570/580 and 630/640 stands at a P/L of +$500, delta = -$45 and theta = +$65.

Next week brings several economic announcements: GDP, home sales, personal consumption data, and the MI consumer sentiment index. Barring any surprises in these announcements, next week is likely to be slow and lacking clear direction, given the holiday and fewer people on the trading floors.

Greece's debt problems appeared to be fueling a flight to safety out of competing currencies and to the dollar. The relationship of stronger dollar and weaker stock prices appears to be still holding. However, unemployment claims moved up a bit from last week and that didn't help the mood on Wall Street. RUT traded downward most of the day, but bounced off $600 and closed at $605, a loss of about $7 on the day. The area of $595 to $600 appears to be holding up well. By contrast, the SPX steadily traded down all day and closed down $12 at $1097, near its intraday low of $1096. Trading volume was up significantly, plus we didn't have buyers strongly entering the market late in the day as we have on recent down market days. That could be a warning sign.

This drop in RUT helped both of my Jan iron condors. The 510/520 and 650/660 condor stands at a P/L of +$1,940 with delta = -$61 and theta = +$114. The 570/580 and 630/640 condor I established a few days ago stands at +$300, delta = -$25 and theta = +$71. Trading the iron condor is emotionally challenging. At times like the past month, it is simply boring, while it can be a roller coaster ride as it was this summer and early fall. You must clearly have your trading rules in mind (preferably written down) and not allow yourself to manufacture new trades when bored or panic when the market moves against you and not make the adjustments in a timely fashion.

The large cap indexes opened up in positive territory this morning and traded sideways until the FOMC announcement this afternoon. Then a sell-off began and erased most of the gains. The SPX gained $1 on the day to close at $1109. But the small and mid cap companies in the RUT index behaved more positively and gave back less of their early gains. RUT closed up $5 at $611. The FOMC conformed expectations for continued low interest rates but also said that most of the emergency lending support measures will end in early 2010. That served to strengthen the dollar which appeared to push the stock market lower. In any case, the same pattern remains: basically a sideways trading market with bulls and bears basically in balance.

My Jan 510/520 and 650/660 iron condor on RUT stands at a net profit of $1,480 with delta = -$79 and theta = +$118. The Jan 570/580 and 630/640 iron condor stands at a P/L of +$50 with delta = -$38 and theta = +$68.

The market opened on a down note this morning, based on the increase in the November Producers Price Index, and a surprising drop in the Empire State Manufacturer's index, a survey of New York state manufacturers. The Empire index came in at 2.6 for December, down from 23.5 in November. This is the lowest value since July. But the market shook that off and recovered most of the losses through the balance of the day, but then sold off to about where the markets opened. RUT closed at $606, down $3 while the SPX closed down $6 at $1108.

It appears to me that the bulls are not sufficiently concerned about this market to sell and take their profits off the table, but they aren't willing to continue buying either. A significant piece of economic data is required to tip this market one way or the other. Next stop: the FOMC announcement tomorrow.

My Jan condor on RUT at 510/520 and 650/660 stands at a net profit of $1,180 with delta = -$84 and theta = +$118. My latest RUT condor at 570/580 and 630/640 stands at a P/L of -$50, delta = -$36 and theta = +$63.

The markets opened in positive territory this morning on overnight news that Dubai World appears to have solved its debt liquidity problems, at least for the time being. And Exxon-Mobil announced its planned acquisition of XTO Energy this morning; this encouraged investors that the merger/acquisition business may start to resume. The dollar traded downward today, which probably helped stocks to trade higher, although that influence appears to be waning. The Russell 200 Index (RUT) traded up steadily all day to close at $610, an increase of over $9. Trade in the S&P 500 (SPX) was more choppy, but closed up almost $8 to close at $1114, a new closing high for the year (the year's high of $1119 was intraday).

The strong increase in RUT pulled the P/L of my Jan iron condor back a bit to +$940, with a delta = -$86 and theta = +$121; the delta of my short $650 calls is just under 16. I decided to add a new Jan condor on RUT with 10 contracts of the 630/640 calls at $2.55 and 570/580 puts at $2.10. This is a shorter term (31 days) iron condor with the spreads positioned much closer to the index (the calls are at 0.5 standard deviation and the puts are at 0.7 standard deviation). This is a more dangerous configuration of the iron condor and must be carefully managed; on the plus side, we should be in and out of this position much more quickly than our normal condors positioned out about 50 days or so. At the end of the day, this position stood at a P/L of -$100, delta = -$34 and theta = +$60. Traders are looking forward to the FOMC meeting later this week, but it is doubtful that they will make any moves that surprise the market. Of course, it is in precisely this complacent situation when any surprise has a huge impact.

The markets traded lower this morning but then steadily gained all afternoon to close with small, but broad based gains. RUT closed up $5 at $600 and the SPX inched up another $4 to close at $1106. These market gains came in the face of a stronger dollar, which is a reversal of the trend of the past several months when stock gains appeared to be tied to a weaker dollar.

The 500/510 put spreads in my Dec RUT iron condors now stand at 4.2 standard deviations OTM and the 630/640 call spreads stand at 1.5 standard deviations OTM. I closed the twenty 630/640 call spreads for $0.25. I will allow the 500/510 put spreads to expire worthless. Assuming those spreads do expire worthless, our Dec condor will finish at a net gain of $2,450 or 15%. My Jan condor stands at a P/L of +$1,260, delta = -$53 and theta = +$108.

This Dec RUT iron condor trade has some lessons in it so let's perform the post mortem: it began with 20 contracts of the 500/510 puts and 20 contracts of the 660/670 calls for a total credit of $3,800 with 51 days to expiration. The RUT first threatened our put spreads and our total adjustments on the put side cost us $360. About that time, we closed the 660/670 calls for a gain of $1,100 and opened 20 contracts of the 630/640 calls for a $2,400 credit. But that move proved to be too aggressive since we then spent $2,090 protecting our call spreads as the RUT moved upward. If I had not rolled those calls downward, this condor would have finished at a gain of $3,440 or 21%. The lesson is: when your adjustment triggers are tripped, move promptly with the planned adjustment, but be very cautious about rolling spreads up or down in an attempt to increase your gains. You may be moving too close to the fire if the wind changes.

Today's trading was again characterized by slow, choppy action with little overall direction.The SPX closed up over $6 at $1102 while the RUT traded down almost $3 to settle at $595. This market appears to be trapped in this range without sufficient confidence to drive higher, but also without a stimulus to start a downward trend. Most signs of economic recovery are muted, leaving traders without the confidence to buy strongly across the board. Recent unemployment numbers are a good example; a drop from 10.2% to 10.0% was greeted as good news by many, but the reality is that 0.2% in within the error of measurement. It is difficult to draw a confident conclusion one way or the other.

In the meantime, this channel bound market is perfect for my iron condors. The Dec RUT iron condor now stands at +$2,390, delta = -$44 and theta = +$180. Tomorrow I will look hard at closing the 630/640 call spreads, but the 500/510 put spreads will most likely be allowed to expire worthless. The Jan RUT iron condor at 510/520 and 650/660 has 35 days left but is well into the black with a net gain of $1,360, delta = -$33 and a positive theta of $97. Only one more week remains in the December options.

Markets traded in a sideways, lackluster way throughout the day. Most of the day was spent slightly underwater, but the buyers came back in around 2:00 pm and pushed the markets back to miniscule gains. RUT closed unchanged at $598 while the SPX moved up $4 to close at $1096. This a wonderful market for delta neutral traders, but it certainly is boring.

My Dec RUT iron condor now stands at a P/L of +$2,150, delta = -$72, and theta = +$164. I will probably be closing the 630/640 call spreads this Friday or possibly Monday because they will most likely be within two standard deviations (now at about one and a quarter standard deviations OTM). I will allow the Dec 500/510 put spreads to expire worthless. My Jan condor stands at a P/L of +$900, delta = -$50 and theta = +$103. So we wait to see if we just continue this slow sideways march into the end of the year. Traditionally, the funds and institutions are buying toward the end of the year to shore up solid year-end numbers, so perhaps this market will hold in this neighborhood for a while.