Dr. Duke's Blog
Do you know any trading coaches who discuss the market candidly without any marketing hype? Dr. Duke publishes a weekly newsletter and shares the track records of his trading services. If you have questions about any of his services, Ask Dr. Duke.
Where Did Everyone Go?
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- Written by Dr. Duke
Yesterday's big gains were on very high trading volumes, a big change from the recent pattern of persistent low volume days. But it appears like all of those traders went home yesterday and didn't come back. SPX dropped down this morning, recovered, and then spent the day trading largely sideways, closing up $1 at $1345. RUT also gained less than a dollar to close at $842. Only 2.5 billion shares of the S&P 500 stocks traded today, significantly down from yesterday's 3.7 billion shares. Trading was down 25% on the NYSE and was down 30% on NASDAQ.
No significant economic reports came out today and the market seemed to reflect that lack of news.
My Aug condor on RUT stands at a P/L of +$1,062 with delta = -$83 and theta = +$91. I opened my Sept RUT condor at 670/680 and 900/910 earlier this week; it stands at a P/L of -$700 with delta = -$78 and theta = +$61.
Have a great weekend!
Return to the Sidelines
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- Written by Dr. Duke
The futures were in positive territory this morning, but trading stalled shortly after the open and the markets just traded sideways all day. SPX closed down $1 at $1326 while RUT traded down $2 to close at $832. Trading volume pulled back from yesterday with 2.7 billion shares of the S&P 500 stocks trading today. Trading volume was down 7% on the NYSE and was down 1% on NASDAQ.
The only significant economic news today was existing home sales coming in at 4.77M in June, essentially unchanged when compared to May's 4.81M.
My Aug iron condor on RUT stands at a P/L of +$1,282 with delta = -$65 and theta = +$89. Since the 670/680 put spreads are so far OTM, the theta/delta ratio is a bit skewed for this position. The delta of the 890 calls is only 9, so the position is reasonably safe for the time being - but who knows what tomorrow will bring?
What, Me Worry?
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- Written by Dr. Duke
One of my favorite magazines growing up was Mad Magazine and "What, me worry?" was the tag line for the satirical magazine. Now some of you are applauding my choice of that magazine and some are thinking you now understand why I need professional help - it was that kind of magazine; you either loved it or hated it.
The markets opened up in positive territory today and then moved even higher after some encouraging news from the discussions (too polite a word) in Washington concerning the debt ceiling. SPX gained $21 to close at $1327 while RUT closed at $835, up $19. But today's strong surge seemed surprising after so many days of pessimism and disaster scenarios being played out by all of the Chicken Littles on CNBC. The same very real and very serious issues remain, but we traded higher - happy days are here again. Trading volume bounced up as well with 3 billion shares of the S&P 500 trading; the 50 dma = 2.8B. Volume was up 7% on NASDAQ but flat on the NYSE.
After hours, AAPL is trading around $400 after another stellar quarter. The Jan 2012 350/400/450 butterfly we have in our trading group will get a nice boost tomorrow, but this move came too soon. If AAPL continues on upward, we will have to close this trade early. That is the problem with options trading; you have to predict the price and the timing of the move. I thought $400 was a reasonable target for year-end. But what am I complaining about - we are making money.
My Aug iron condor on RUT stands at a P/L of +$862 with a position delta of -$65 and position theta of +$110. So now it will be interesting to see how long we can go without the malaise of Euro zone debt, unemployment, etc. catching up with us again.
Traders Need a Couch
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- Written by Dr. Duke
The mood on Wall Street continues to be rather pessimistic with everyone focused on disaster scenarios such as a Euro zone default bringing down the global economy or Washington gridlock leading to the U.S. defaulting on its debt (this scenario is being told largely as a negotiating tactic - in reality, it is highly unlikely). The earnings reports so far have been pretty good but that hasn't affected trading outside of the particular stocks reporting. SPX closed down $11 at $1305 and RUT lost $13 to close at $816. Markets were down even more in early trading but recovered somewhat through the day. Outside of gold and AAPL, the screens were largely red. AAPL set a new all time high at $374 in advance of its earnings announcement tomorrow evening. But trading volume was down from Friday with 2.8 billion shares of the S&P 500 trading (right at the 50 dma). Trading volume on the NYSE was down 19% and trading was down 3% on NASDAQ.
My August iron condor on RUT continues to plug along, now at a net P/L of +$1,802 and delta = -$9 and theta = +$66. The pull back of the past week or so has actually pulled this condor back to a nice delta neutral position. The AAPL Jan 2012 butterfly recommended in my trading group a few weeks ago is doing well with AAPL's run upward; this position is already up 36%.
Today I opened a new section in the free Downloads area of this web site. I invite any of my blog readers to contribute any file that might be of interest to your fellow traders. The first entry is an article from one of my clients describing his journey learning to trade. If you have spreadsheets that you have found useful in your trading or anything else you would like to share, just send it to me with a note describing it and I will upload it to the web site.
Are you positioning yourself for Apple's earnings announcement? It should be interesting...
Traders Can't Quite Decide
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- Written by Dr. Duke
The news is filled with negativity: European debt woes, raucous debt negotiations in Washington, persistent unemployment. But so far in this earnings season, corporate balance sheets look pretty good. What is a trader to do? Today's trading seemed to reflect that indecision today, chopping back and forth all day; but the bulls took a run at it during the last hour and managed to close the day with positive results on all of the major indexes. It appears this market's bias is to the upside. A resolution to the debt negotiations in DC could be the trigger.
The market's mood wasn't helped with a negative Empire manufacturing survey result and a large decline in the Michigan Consumer Sentiment survey from last month's 71.5 to 63.8 for July. And the uncertainty surrounding the continued deadlock in Washington is weighing on the market.
My Aug iron condor on RUT at 670/680 and 890/900 stands at a P/L of +$962 with a position delta of -$64 and theta = +$88. The July condor's put spreads expire worthless this weekend.
Have a great weekend.
Bernanke Gives and Bernanke Takes Away
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- Written by Dr. Duke
The markets opened this morning in positive territory based largely on JPMorgan's positive earnings announcement. Bernanke's first day of testimony before Congress yesterday boosted stocks, but today's remarks turned the bulls into bears and the selling ensued. The relevant remarks appeared to be Bernanke's assertion that the Fed did not think it necessary to intervene any further to support the markets and did not have a plan to do so at this time. SPX hit a high of $1327 before selling off, breaking through the 50 dma and closing at $1309, down $9. RUT lost $14 to close at $823. Trading volume increased a bit across the board with 2.9 billion shares of the S&P 500 trading (the 50 dma = 2.8B). Trading on the NYSE was down 7% and was down 2% on NASDAQ.
Traders began the day with several economic reports. Initial unemployment claims were down 22 thousand at 405k while continuing unemployment claims were up 15k at 3.7 million. Retail sales were up 0.1%, but after auto sales are extracted, retail sales were flat for June. The PPI for June was down 0.4%. It did not appear that any of this data moved the market significantly one way or the other.
We closed the GOOG Double Calendar spread from Dr. Duke's Trading Group today for a 27% gain. I wish I had bought some GOOG calls this afternoon!
My Aug iron condor on RUT stands at a P/L of +$1,142 with a position delta of -$34 and a position theta of +$77. After my July put spreads expire this weekend, I will start to look for the right time to initiate the September position. I can't believe I am talking about September options positions - where is the summer going?
Bernanke Boosts Market
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- Written by Dr. Duke
Bernanke's comments this morning plus a strong second quarter GDP report from China buoyed the markets today but enthusiasm waned as the day wore on. SPX traded as high as $1331 but closed at $1317, up $4. RUT gained $7 to close at $837. Trading volume dropped below the 50 dma with 2.6 billion shares of the S&P 500 changing hands. Volume was down 4% on the NYSE and down 7% on NASDAQ.
Today was a light day for economic data; tomorrow brings the unemployment claims, the PPI and retail sales.
My August iron condor on RUT at 670/680 and 890/900 stands at breakeven with position delta = -$78 and theta = +$100. Perhaps some of the upcoming earnings reports will change the dark mood of this market.
Markets Trade Lower on Higher Volume
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- Written by Dr. Duke
European sovereign debt issues loomed large in traders' minds today. Late in the day Moody's added to the gloom by downgrading Ireland's debt. SPX closed down $6 at $1314 and RUT lost $4 to close at $830. SPX bounced off of the 50 dma yesterday and earlier today, that support level appeared to have held once again. But late afternoon trading pushed markets lower and SPX broke through and closed below the 50 dma. Given that all of this occurred on higher levels of trading volume is not a good sign. Trading in the S&P 500 stocks rose above the 50 dma to 2.9 billion shares and trading volume was up 12% on the NYSE; Volume on NASDAQ was up 14%. IBD moved from a market assessment of "Confirmed Uptrend" to "Uptrend Under Pressure" yesterday.
IVolatility.com noted the possible head and shoulders pattern in the S&P 500 in their newsletter this week: left shoulder at $1345 on 2/21, head at $1370 on May 2 and right shoulder at $1355 on 6/30. The head and shoulders pattern is a classic upward trend reversal signal. It is confirmed when the price breaks down through the neckline of the pattern. In the case of SPX, that is around $1260 to $1265. My first reaction when looking at this was simply that by the time SPX breaks $1260, everyone will know the trend has turned. However, it isn't the prettiest head and shoulders pattern I have ever seen.
My Aug iron condor is essentially at break-even with a position delta of -$76 and theta = +$109. The delta of the 890 calls has returned to 12 and the call spreads are roughly one standard deviation OTM. So enough of this; now we return to worrying about Europe.
Selling Intensifies
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- Written by Dr. Duke
Traders' concerns turned once again to the European Union and the sovereign debt issues that threaten to tear the union apart. Selling was even more intense today than on Friday after the disappointing jobs report. The SPX closed down $24 at $1319 and RUT closed at $834 for a loss of $19. Trading volume bumped up a bit with 2.6 billion shares of the S&P 500 trading; however, this is still below the 50 dma. Volume was up 8% on the NYSE and was up 10% on NASDAQ.
There were no economic data reports of any consequence today. I tire of the talking heads on CNBC "explaining" today's declines as due to worries about European debt issues when the same analysts told us last week that European debt was old news and the market had moved on. There is no explaining or predicting of human emotions and fear of the unknown.
My Aug iron condor stands at -$218 with a position delta = -$72 and position theta = +$108. I removed the hedge today. Only the 700/710 put spreads remain from the July iron condor on RUT; I will allow them to expire worthless.
Jobs Report Disappoints
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- Written by Dr. Duke
The jobs report (officially, the nonfarm payrolls report) reported an increase of 18,000 jobs in June. Analysts expected 80k. It seems a little surprising that the market reacted as strongly as it did; a weak economy that isn't creating jobs should not have been a surprise. Unemployment moved up a bit to 9.2%. SPX closed down $9 at $1344 and RUT closed at $853, down $6. We will continue to watch the SPX level of $1370 to see if this bull trend is going to resume. That was the high set back at the beginning of May. A pullback from there will suggest a broad trading range of $1260 to $1370. Pull up a longer term chart of SPX and you will see my point.
The market's explosive run upward caused me to close the 880/890 calls on my July iron condor on RUT yesterday. Today's pull back is frustrating, but you have to follow your rules or risk much larger losses. Assuming that the 700/710 puts expire worthless next week, my July condor has closed at a gain of $820 or 5%. My Aug condor has already been adjusted and is now flirting with forcing me to close the call spreads and re-position the spreads. It is now underwater by $758 and position delta = -$62 and position theta = +$43.
Some analysts recommended today's pull back as a trading opportunity. We'll see next week.
Have a great weekend.