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Do you know any trading coaches who publish the results of their trades daily, as the trade progresses? Dr. Duke analyzes the market and reviews the progress of his iron condor spreads in the Flying With The Condor™ service each day in this blog. If you have questions about any of the trades, Ask Dr. Duke.

The November 2014 position in the Flying With The Condor™ account survived the downturn in October very nicely and was closed with a 13% gain. We also dodged the flash crash on August 24th by going to cash the previous week. The Flying With The Condor™ service ended 2015 up 40%, handily beating the S&P 500 Index. Check the Track Record in the Downloads section for details.


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

 

As some of you know, my web site was hit by hackers last week and my blog has been incapacitated until earlier today. We closed the holes and are in the process of moving to a more secure hosting environment. I added one additional feature when bringing the blog back up. You can now click on the Comments link and add your comments or questions to the latest blog entry.

The markets started the day with weakness and traded sideways through much of the day. Then traders began buying and pushed stocks higher, forcing many short positions to cover late in the session, forcing prices even higher. RUT closed at $600, a new high for the year. My Sept iron condors now stand at a net gain of $2,550 with position delta = -$166 and theta = +$680 - huge theta! The delta of the Sept $620 calls is 9, slightly over one standard deviation OTM. Unless the RUT pulls back quite a bit, I will be closing the call spreads sometime before Thursday's close.

My October iron condors are near breakeven at -$95 for the overall position and position delta of -$80 and theta = +$71. The delta of the short $640 calls = 18. Both the theta/delta ratio having dropped below 1:1 and the short delta of 18 are dictating an adjustment. If the market continues higher tomorrow, I will be looking to buy at least one Nov $640 call.

The markets started the day on a positive note and the RUT and SPX traded up to their recent resistance levels, but then retreated after the Fed's Beige Book was released with virtually no positive news on the economy. But then the bulls tossed the Beige Book aside and drove the market into the bell with the RUT closing up over $10 to $586.40 and SPX closing at $1033.37. This leaves both indexes right at their resistance levels; it will be interesting to see if the bulls can drive through to higher highs.

My Sept iron condor (20 contracts of the 480/490 puts, 10 contracts of the 500/510 puts, and 30 contracts of the 620/630 calls) stands at a P/L of +$2,780, delta =-$76, and theta = +$240; theta is really gaining as we roll down to the last week of these options. The Oct iron condor (15 contracts of the 460/470 puts and 15 contracts of the 640/650 calls) has a P/L of +$400, delta =-$45, and theta = +$65. The Oct $640 calls stand right at one standard deviation OTM with a delta of 12. I will adjust this condor if the delta of this short call exceeds 17-18.

The markets continue to have a bias to the upside, although the pace has moderated significantly. The Russell 2000 Index (RUT) closed up at $576.38, nearing its resistance level of $580-$589, set the last week of August. The Standard and Poors 500 (SPX) closed at $1025.39, near its resistance level of $1035-$1039.

My Sept iron condors are in excellent shape as we wind down toward September expiration with P/L = +$3,210, delta = -$37, and theta = +$137. The Oct condors are much farther from expiration, but are in good shape with a P/L = +$625, delta = -$29, and theta = +$61.

I tried an experiment this holiday weekend. I recorded the closing prices for all of the options in my September and October condors on Friday and then adjusted for the RUT price change (delta) and IV change (vega) this morning and compared those adjusted prices to the market prices. If the market makers had completely adjusted their prices Friday for the three days of time decay, one would expect my adjusted prices to be high since I had not accounted for any time decay. As it turns out, it is about half and half (based on one rough set of data); it appears that most of the time decay was already taken out of about half of these options, but not all of the decay was accounted for in about half of the options. So the lesson is this: if you are establishing any positive theta positions before a long holiday weekend, put them on early Friday at the latest; Thursday is probably better. By Friday afternoon, much, but probably not all, of the time decay has already been factored in the option price.

The unemployment report surprised us with an increase to 9.7%, but this didn't faze the market. This market's resilience has surprised me over the past several sessions; it continues to shake off bad news and rally back from intra-day lows. RUT and SPX both closed up at $571 and $1016, respectively. However, the trading volume was low today going into the holiday weekend, so it is hard to have much confidence in one's conclusions here. Just reading the chart leads one to believe the dangers to delta neutral traders remain on the top side; however, I still have not seen much to make me optimistic about this economy. But the market doesn't agree with me. So I will continue to play what the market gives me, even while I am scratching my head.

My Sept iron condor stands at a P/L of +$2,740, delta = -$17, and theta = +$162 - excellent numbers. The Oct iron condor still has 41 days left in it, so the numbers aren't as pretty: P/L of +$550, delta = -$16, and theta = +$57. But they aren't bad. The theta/delta ratio is still very strong at 3.5.

With my positions sitting pretty, it will be easy to relax this holiday weekend. I hope you get to spend some quality time with family and friends.

The markets opened and traded down early today and then spent most of the day trading choppily and mostly sideways. But the bulls came to the floor in the last hour and pushed all of the major indexes higher. The Russell 2000 Index traded as low as $552 in the morning and closed at its high for the day, $562.49. The Standard and Poors 500 (SPX) traded in a similar pattern and closed within a quarter of its high for the day at $1003.24. Gold closed at a six month high of $998.

Early in the day, the talking heads attributed the sideways trading to the market waiting for the unemployment numbers tomorrow morning. If that was true, someone must have decided those numbers are going to look better than expected, given the strength of the buying late in the day. The patterns of trading this week seem to suggest a fundamentally sound market and just some healthy consolidation occurring. However, I think most market players are still a little on edge from the extreme volatility of the past year. So some surprise, like a big jump in the unemployment number tomorrow, might push this market off the cliff. However, in the absence of that panic scenario, my iron condors will continue to generate profit as we consolidate sideways. My condors are in excellent shape with the Sept position at a P/L of +$2,290, delta = +$7 and theta = +$191. The Oct condor closed at a P/L of +$160, delta = -$14 and theta = +$66. So now we watch for the unemployment number and, barring no surprises, we enjoy a long weekend of time decay.

The markets didn't do much of anything today. RUT closed down a couple of dollars to $556 - still holding at support around $550. The SPX closed down $3 to $995, still in its support area; look at the SPX chart for Aug 4-14 and see how it held in the range of $992 to $1012 for several days; that is the support level I'm watching. A strong breakout at higher volume below $990 would be of concern; otherwise, this market is just consolidating after a huge rally. And we may be seeing a bit of a slowdown before the holiday weekend.

My condors are loving this consolidation - delta stays neutral while positive time decay works in my favor. The Sept condor stands at a P/L of +$1920, delta = +$32, and theta = +$185, while the Oct position stands at a P/L of +$70, delta = -$9, and theta = +$63.

An old Wall Street saying is to "buy the rumor and sell the news". This morning's market saw favorable reports for the ISM Manufacturing Index, July construction spending, and pending home sales for July. But the market's favorable reaction didn't last long; by mid morning, all of the indexes were falling significantly. The rationale was that all of this good economic news was priced into the market in the recent rally, so profit taking ensued. The SPX closed at $998, near its long term support level of $1000, and RUT closed at $558, just above its $550 support level.


The downward moves of the past few days have been helpful for my iron condors. The Sept condor stands at a P/L of +$1,690, delta = +$17, and theta = +$199. So we are very close to delta neutral with theta decay generating about $200 per day. The Oct condor still has 44 days left in it and this market has left the RUT near the midpoint of this condor; normally, I would be looking to roll up or down one side or the other and take some profits here, but the increased IV has prevented that so far. Currently, the Oct condor stands at a P/L of +$70, delta = -$5, and theta = +$59. As long as the market doesn't "fall off the cliff", we will do nothing with these positions.

Significant drops overnight in the Asian markets caused concern for traders here and those concerns even affected the commodities markets, with oil trading below $70 and gold trading down to $954. Some strengthening occurred late in the day that pared losses, so the market appears to have an underlying strength. Trading volume was up somewhat, but still at low values historically. RUT closed down over $7 to $572.

My Sept iron condor now stands at a P/L of +$2100, delta = -$30 and theta = +$165. The Oct iron condor stands at a P/L of +$70, delta = -$29 and theta = +$59. All of my short strikes are more than 1.5 standard deviations OTM at this point. But, as we have seen repeatedly in this market, all of that can change pretty quickly.

Favorable earnings announcements and outlooks from Intel and Dell boosted the markets this morning, but the sellers came out of the woodwork and took their profits, driving the market down for most of the day. RUT closed down at $580 and the SPX closed down at $1029. It appears this market senses that all of the good news has already been priced into stocks and is prepared to take profits on any rally. However, the trading volume has been low, so drawing conclusions from the price movements this week may be dangerous. Perhaps the rally resumes after Labor Day when everyone returns to the floor.

This pullback has been a welcome relief for my condor positions. My Sept iron condor now stands at a profit of $1040, delta = -$103 and a theta of +$200. The short $620 calls are back to about one standard deviation OTM. The Oct iron condor now stands at a P/L of -$230, delta = -$39 and theta = +$57. Although the $460/$470 put spreads are now about two standard deviations OTM, I will resist the temptation to roll them up. That downside cushion is welcome as the market consolidates at the current levels.

Several favorable economic reports this morning failed to impress traders and the market slid in low volume trading. But buyers came in to push the market back up and in most cases had turned the red ink into positive gains by market closing. The DJIA closed at $9581; SPX closed up by $3 at $1031 and RUT closed essentially unchanged at $583.77. The RUT chart has been trading sideways between $572 and $588 for the past four or five sessions. The question on everyone's mind is whether it will suddenly break out up or down, or just trade sideways to consolidate for a while.

I had begun to take off my long call hedges yesterday, and during the market's weakness this morning, I removed the balance of the hedges from both my Sept and my Oct condors. This morning, the deltas of my short Sept $620 calls had dropped to 11 and the short Oct $640 calls had dropped to 15. I sold the Oct $620 calls at $7.50 and the Nov $640 calls at $8.90. As the market rebounded, the deltas of the short Sept $620 calls and the short Oct $640 calls had increased to 14 and 16, respectively.

My Sept condor now stands at a P/L of +$130, delta = -$151, and theta = +$210. This is a higher delta than I would like; I may end up buying long calls again to hedge this position. This volatile market has a way of jerking these positions around. At this point, I have spent a total of $911 on both put and call hedges for this condor, but a potential gain of $3,800 remains.

My Oct condor now stands at a P/L of -$650, delta = -$52, and theta = +$60. Removing the Nov call today cost me $200 (my insurance premium). Aggressively hedging my iron condors does reduce my potential gains, but protecting my downside on these positions is crucial to long term success.