The pull back many of us have been expecting for some time finally occurred today. Financial stocks led the downward trend and a strong dollar contributed as well. Earnings reports from AAPL and IBM were both rather positive, but were not sufficient to prevent a bout of profit taking. That tended to set a negative tone to the market at the opening this morning. Housing starts for September were up modestly to 610k from last month's 608k. Building permits dropped from last month's 571k to 539k in September. So neither the economic news or the earnings reports were clearly the cause for the market's tumble. Many indicators have been pointing to overbought for some time and it finally tipped over today. SPX lost $19 to close at $1166 while RUT closed at $694, down $16. Stocks traded higher in the last few minutes of trading, a positive sign for the day. Trading volume was up across the board with 4.7 billion shares of the S&P 500 stocks changing hands. Trading on the NYSE was up 32% and was up 28% on NASDAQ. So we had a big down day on increased volume - that may suggest more down days in front of us.

I sold the Dec calls hedging the Nov iron condor position this afternoon as the delta on my short Nov calls hit 16. This position now stands at a P/L of -$2,306 with delta = -$70, and theta = +$150. The cost of my "insurance" was $780, but this position still has the potential for a $2,574 profit. The hedge served its purpose by keeping us in the game now that the market has pulled back. Our theta/delta ratio is quite strong. If the market continues to pull back, this position will be even stronger. If the market appears to stabilize, I will initiate the Dec condor position this week.