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Some modestly good economic numbers were enough to boost this market today, but the fear is still running high as evidenced in the VIX at 19.5%. Durable orders came in with a 1.1% increase for May and pending home sales were up 5.9% in May. This brought out some buyers who drove the SPX up $12 to close at $1332. RUT rose $11 to close at $776. Trading volume remains flat with 2.3 billion shares of the S&P 500 trading; trading volume on the NYSE was down 3% and trading on NASDAQ was up 2%.
While everyone is focused on the European Summit, it also seems like everyone on CNBC is telling us they don't expect anything substantive to come out of the summit. So we have heightened fear of what might come out of Europe coupled with low expectations. That is a formula for sideways choppy trading and I expect that is exactly what we are in for. The supreme court ruling on ObamaCare isn't likely to move the overall market much, in my opinion, but I could be wrong. We'll see. I think that event will be more fodder for the talk radio shows rather than market moving.
My July iron condor on RUT stands at a 15% gain with delta = -$17 and theta = +$27. At this point, there isn't much time value in those options, so the theta decay is pretty small. The primary question with this position at this point is whether to close it early or not. On the one hand, I can capture a nice 15% gain and go take a nap. On the other, the debits to close, while small, add up to real money on several hundred contract positions. We'll see. One thing I am not considering is rolling spreads up or down to increase my gains. I have learned the hard way that when I stretch for those additional gains, I often get in trouble... Some will accuse me of being boring, but I'm up over 30% at mid-year!
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Trading wasn't too bad today; the markets opened weakly, but started to gain modestly in afternoon trade. The Conference Board's consumer confidence survey came in this morning at 62.0 for June, down over two points from May. That put a damper on morning trade. European debt woes overshadow everything now. But the good news is that support in the market indexes appears to be holding for now. Probably the best we can expect is a choppy sideways market for the near future. However, additional poor economic data here in the states or more bad news out of Europe could easily push us over the edge. SPX closed at $1320, up $6 while RUT moved up $3 to close at $765. Trading volume was flat with 2.5 billion shares of the S&P 500 trading today. Trading volume on the NYSE was down 2% and volume was up 8% on NASDAQ. VIX dropped a bit, closing at 19.7%.
The Case Schiller housing price index dropped 1.9% in April, but the market was expecting a worse number, so this actually buoyed some buying, especially in the home builders. Trading will likely remain subdued in advance of the European Summit, but this market is rather fragile. Ironically, no one really expects any permanent solutions to come out of the summit, but everyone is focused on it anyway. I wouldn't want to trade the markets based on a sideways prediction at this point. Any little news clip could tip it over.
My July iron condor on RUT at 610/620 and 850/860 is roughly unchanged with a net gain of 15% and delta = -$2 and theta = +$20 (on 20 contracts).
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Markets pulled back significantly today and that certainly caused many traders to breathe a sign of relief. Yesterday was a scary day in the markets. Pull up a one minute chart of the S&P 500 from yesterday; it is unusual to see a one minute chart that is so steadily headed in one direction with almost no deviations at all for an entire trading session. But today was more normal with a lot of choppy sideways trading, but it stayed in the positive column and then traded strongly in the afternoon. SPX traded up $10 to close right at resistance at $1335. RUT likewise closed at resistance at $775, up $10 on the day. The fact that SPX didn't blow right through resistance on its way back north is significant, in my opinion. It means that we may not be going over the cliff, but don't be complacent. It's still dangerous out there. VIX dropped back to 18.1% which is somewhat reassuring.
There was no significant economic data released today. Moody's downgraded many banks last evening and the significant news was that bigger downgrades were priced into many of those banks. So today saw these stocks trading sideways or only minimally lower.
My July iron condor on RUT stands at a P/L of +$2,420 with delta = -$16 and theta = +$34 on 20 contracts. Several of my clients have asked me about closing this position and opening a new trade for July. There are many feasible ways to successfully trade options. My approach to non-directional trading isn't "the answer". I have traded condors much more aggressively in the past and it is certainly possible to aggressively roll spreads up and down and make much larger gains - but this also exposes you to much more risk. And every once in a while, the market whipsaws and runs over you. My trading style is probably too boring for many traders, but it makes a steady return without a lot of stress. After all, the Flying With The Condor™ is up 29% so far this year. That's not chicken feed, as my dad used to say (I have never fed chickens, so I don't know about these things). If you seek excitement, our services aren't for you, but if you want to turn your trading into a money-making business, check out Flying With The Condor™ and our newly released DVD series, The Ultimate Options Course.
Have a great weekend. Remind yourself this weekend what is really important. Hint: it isn't money.
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The markets tumbled at the open today and then traded sideways the rest of the day. It appears that traders started the week with very little confidence that the upcoming European summit meeting will yield anything substantive. The expected supreme court ruling on ObamaCare probably doesn't help the mood. Many traders are simply taking off risk and sitting on the sidelines until the turmoil subsides. SPX opened at the resistance level at $1335 where it closed Friday, but it immediately traded down from there. SPX closed at $1314, down $21. RUT also opened at a key resistance level at $775 and traded down to close at $762, down $13. RUT closed right at the 200 dma - will that act as support?
Trading volume dropped off dramatically with 2.6 billion shares of the S&P 500 stocks trading. Trading on the NYSE dropped 20% and volume on NASDAQ dropped 34%. VIX spiked up over 21% but closed at 20.4%. So traders are certainly not calm, but the drop in trading volume and relatively low VIX seems to suggest a lack of panic. But the wild card is whatever news may hit the wire tomorrow - this type of market is very susceptible to big moves off seemingly minor stories.
My July condor continues to fare well with a net 15% gain and a position delta of +$0.09 - that is the smallest delta I have ever had on an iron condor in one of my accounts. This week is likely to be a wild ride in the markets. Keep your positions hedged and try to stay calm. Don't make any big bets either way.
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As expected, the Fed did disappoint traders with an announcement today to continue Operation Twist through the end of the year. Many had hoped for a new round of quantitative easing. But the disappointment wasn't too severe. SPX traded down to its 50 dma and rebounded to close at $1356, down $2 on the day. RUT lost $2 to close at $784. All in all, it was a pretty mild day of trading. So far, the resistance set in April at about $1358 appears to be holding; the nearest support level is around $1335 - $1340. I will be watching tomorrow's open to see if support is threatened after an overnight reflection on Bernanke's remarks. Tomorrow's report of unemployment claims may also influence that open.
VIX dropped off about one point to close at 17.24%, so fear is slowing easing out of this market.
My July iron condor at 610/620 and 850/860 stands at a P/L of +$1,860 with delta = -$33 and theta = +$74 (20 contracts). The call spreads are over one standard deviation OTM with 29 days to go to expiration. Other than the FOMC announcement, there was minimal economic data or news today. And outside of the unemployment claims data tomorrow, there are minimal economic data due to be reported this week. So will SPX hold support at $1335 - $1340?
