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The markets continued their steady uptick today. Alcoa kicked off a positive session with better than expected earnings. But a weak T-bond auction put the brakes on in afternoon trading. RUT traded as high as $612, but closed at $608, while the SPX traded as high as $1071 but closed at $1065. The 2009 highs set a few weeks ago will serve as the next resistance levels this market must break to remain on this bullish trend: RUT = $625 and SPX = $1080. The dollar continued to trade downward and this pushed commodities to new highs; Gold closed at $1056. The question in my mind is when does a weaker dollar begin to weigh on this stock market?

I decided to take advantage of this market strength and roll my Nov 500/510 put spreads up to 520/530. I closed 20 contracts of the 500/510 puts for $0.55 ($640 profit) and opened 20 contracts of the 520/530 puts for $0.75. That brings my Nov condor to a P/L = +$660, delta = -$17 and theta = +$89. My Oct condor is still plugging along at a P/L of +$400, delta = +$3 and theta = +$94. My Oct 660/670 calls are just outside of two standard deviations OTM. If this market continues trending upward, I may have to close those calls. I will take a hard look at that question tomorrow afternoon.

The markets traded most of the day in negative territory, but ended the day slightly up. RUT closed at $602 and the SPX closed at $1058. The markets continue on the bullish trend, albeit consolidating to a large degree lately. All in all, this is currently a good market for delta neutral strategies - a welcome relief from the strong trending market of a few weeks ago.

My Oct condor hasn't changed much from yesterday, but theta is starting to build as we near the final week of the October options' life: P/L = +$130, delta = +$18 and theta = +$135. Both short strikes are outside of two standard deviations at this point. The Friday before expiration is the time when I apply my "close or let go" decision. I will close positions that are under two standard deviations OTM; spreads that are greater than two standard deviations OTM will be allowed to expire worthless (but watched carefully). My Nov condor stands at a P/L of +$1,020, delta = -$11 and theta = +$76. This condor is positioned well right now, but we still have 43 days for the market to move against us. Stay tuned.

Well, there is no doubting that we bounced off support at this point. RUT closed at $602, up almost $11 and the SPX closed at $1055. There was virtually no big economic news today. Some pointed to the Aussies bumping up their central bank's lending rate as an indication that the global economy is rebounding. But the important rule to always keep in mind is: don't try to predict or rationalize. Just trade what the market gives you.

This market is giving my condors exactly what they needed, moving the RUT back very close to equidistant between my spreads. The Oct condor has a P/L of +$160, delta = +$21 and theta = +$91. Each of the short strikes are now over two standard deviations OTM. My Nov condor stands at a P/L of +$470, delta = -$10 and theta = +$79. The Nov short strikes are each over one standard deviation OTM.

The markets opened this morning and traded pretty choppily (if there is such a word) most of the morning, but afternoon trading was generally steady and strong. RUT gained $11 to close at $591 while the SPX gained $15 to close at $1040. The talking heads were all nervous before the opening bell this morning, wondering if last week's action was the beginning of a significant correction of 10% or more. I don't know what tomorrow may bring, but today's market appeared pretty solid. It seems the bulls who brought the market this far are still largely bullish and are content to just pause and consolidate, rather than take their profits and go to cash.

Today's market was kind to my condors. The Oct condor now stands at a P/L of -$395, delta = +$46 and theta = +$123. I may scratch out a profit from Oct after all! The Oct call spreads are now over two standard deviations OTM and the Oct put spreads are about one and a half standard deviations OTM.

My Nov condor now stands at a P/L of +$800, delta = +$5 and theta = +$68. So the Nov position is looking good so far.

As many expected, the jobs report wasn't pretty, but the market didn't panic. From a technical perspective, support held and the underlying bullish sentiment still appears to be holding. RUT closed at $580, down about $4 and right at its support level set several weeks ago. Similarly, the SPX closed down at $1025, within the support range set in late August.

I sold my Nov $570 put for $21.30 ( a $30 loss). I purchased this put yesterday morning to protect against the slide ongoing in yesterday's market and as insurance for this morning's reaction to the jobs report. My Oct condor could still use the protection, but my short $550 put is now one standard deviation OTM and I don't have much profit left in this trade to pay for the insurance. When it appeared the RUT had settled at support, I took a risk and sold the long put. My Oct condor now stands at a P/L of -$1,415, position delta = +$72, and theta = +$116. A delta/theta ratio of about 1:1 is one of my "lines in the sand". This condor needs several days of sideways trading to salvage a profit. The Nov condor stands at a P/L of +$100, position delta = +$21, and theta = +$66. These Greeks look good, but we still have a lot of time exposure in this position. Next week appears to be a little less loaded with heavy economic reports so maybe we can catch a breather.



Sorry I am late with the blog. After I adjusted my positions this afternoon, I replaced the brakes on one of the cars and it took longer than I expected - a common characteristic of my home projects. Yesterday's market weakness spilled over into today; there were several economic reports, but nothing really dreadful. Many observers of the market are speculating that people are taking money off the table in anticipation of tomorrow's unemployment report. We'll see. One thing's for sure - it will be a volatile day.

RUT closed down over $20 at $584 and SPX dropped to $1030. Note how both indexes held up right at the support level set in late August. If they break that support level tomorrow, SPX could challenge the $1000 level and RUT's next support is around $575 and then $550.

About 12:30 this afternoon, I decided to adjust my Oct condor, partly because of today's downward move and partly in preparation for tomorrow. Before the adjustment, the position's delta stood at +$47 and theta was +$116. That wasn't too bad, but I decided to cut those deltas just in case this market gets ugly. I bought one Nov $520 put for $21.60. I chose that strike for the larger delta impact. At the close, delta = +$14 and theta = +$88. The Nov condor stands at a P/L of +$20, delta = +$19 and theta = +65. Tomorrow should be interesting.

An old friend of mine used to say, "he's as nervous as a long tailed cat in a room full of rockers". That describes the current market climate pretty well. Before the market opened this morning the S&P futures were pointing to a positive opening, based on some positive earnings announcements and the upward revision of the second quarter GDP. And the market did open and trade up, but it didn't last long. The Chicago Purchasing Managers Index (PMI) for Sept was released a few minutes after the market opened and stocks plummeted. The ADP payroll data showing the loss of 245k jobs in September didn't help - and this sets up anticipation for the jobs report Friday. It is hard to predict the direction, but a volatile reaction to the Friday jobs reports appears likely.

I don't know if many of you follow candlesticks as a technical indicator. I am not a "true believer" but I do think the interpretation of the basic candlestick pattern does have some merit. For example, today's candlestick on RUT and SPX wasn't quite what they call a "hanging man" - the tail was not nearly long enough. But think about what that pattern tells us about the "tug of war" in the marketplace. The bulls had control for a few minutes this morning and drove the prices up, but quickly were overrun by the bears and they took it down near the lows of last week. But then the bulls reasserted themselves and pulled it back and erased much of the loss before the day ended. My conclusions are: 1) the bulls remain the dominant force in this market; they have repeatedly come in the market late in the day and pulled this market back up. But 2) there are a lot of nervous traders in the market that are ready to turn bearish in a split second. So we have a bullish trend, but it is hard to predict what might cause a panic run to the exits that the bulls will be unable to contain.

My limping Oct condor is doing well, or at least as well as one can expect with a P/L of -$605, delta = +$11, and theta = +$112. I didn't point it out earlier, but when I rolled the calls and puts of this condor upward, I could have increased the size of the position and salvaged more profit; but that would have increased the risk of this position, and I am trying to show how a conservative trader can manage these iron condors. If the market continues trading sideways, this position will break into the black early next week, but I will have a minimal profit for October, if I salvage a profit at all. The Nov condor is faring well with a P/L of -$40, delta = -$25 and theta = +$78. Hang on for the ride...

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.