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The markets opened up weakly in the black today but began giving the gains back within a few minutes and slowly declined all day, closing near the lows of the day. SPX closed down $14 at $1205 and RUT lost $13 to close at $709. Trading volume dropped dramatically with only 2.7 billion shares of the S&P 500 stocks trading today. Volume dropped 39% and 38%, respectively, on the NYSE and on NASDAQ.
There wasn't much economic news today, but financials seemed to lead the market weakness, but it wasn't clear what news precipitated that move. Band of America shares dropped below $5 today. I used to think of $5 stocks belonging to some little company few had heard of, but no more.
I closed the 970/980 put spreads in my January iron condor on SPX; with the earlier close of the 1350/1360 call spreads, that locks in an 11% gain.
The Santa Claus rally is remaining elusive so far. Maybe this will be one of the "exception" years.
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The bulls just can't seem to make their case. They had a couple of opportunities this week, but the runs to the upside fizzled out each time. This morning, the markets opened up in the black and traded upward, but it didn't last. SPX traded as high as $1231 before falling back and closing at $1220, up $4. RUT followed suit, running to $731 and then closing at $722, up $6. This was quadruple witching week, with expiration of the index options, index futures, stock options, and single stock options. Consequently, trading volume spiked with 4.1 billion shares of the S&P 500 changing hands. This is the first time in December that trading volume on SPX has broken the 50 day moving average; it only broke the 50 dma three times in November. Trading on the NYSE was up 48% and volume jumped 44% on NASDAQ.
Economic data was in short supply today. the CPI rose 0.2% in November and Fitch downgraded several large European and international banks, including BAC and GS. They also warned of possible downgrades for several European countries.
RUT settled at $721.85 and SPX settled at $1225.05. Thus, the remaining 560/570 put spreads in my December iron condor expired worthless, confirming a gain of $2,000 on 20 contracts or 12% on the capital at risk. That brings the 2011 track record for the Flying With The Condor™ to +39%. The Jan SPX iron condor stands at a net gain of $2,100 with the 970/980 put spreads remaining open. I will probably close them next week and make room for a new condor for the January expiration month.
I have kept a spreadsheet of the Thursday closing prices and the settlement prices for SPX and RUT for the past five years. That data is the basis of my Two Sigma Rule for closing positions before expiration week. The average difference between Thursday's close and the settlement price on Friday for SPX is $8.40 and $6.02 for RUT for the eleven months of 2011. That works out to approximately one half of a standard deviation for the overnight move, on average. But averages can have some outliers hiding in the data; thus, the Two Sigma Rule on the Friday before expiration week is a safe guideline.
Enjoy your weekend.
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Italy's latest bond auction further reinforced the traders' concerns over European debt with bond yields reaching 6.5%. The dollar strengthened against the Euro and US stocks dropped again today, although on only slightly higher volume. SPX closed down $14 at $1212 and RUT lost $10 to close at $708. Trading volume in the S&P 500 was slightly up at 3.2 billion shares, still below the 50 dma. Trading volume was flat on the NYSE and up 2% on NASDAQ.
No significant economic data were released today, so the fears about the European debt crisis leading to a global recession appear to be driving the pessimism.
My Jan iron condor on SPX stands at a P/L of +$1,980 with delta = -$2 and theta = +$49, on 20 contracts. The theta/delta ratio is strong; in fact, I am tempted to close this position early and lock in a nice gain. Hmmm.. My directional trades are being run over by this market as my delta neutral trades are making money. It makes a good case for diversifying your strategies.
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The markets were caught today between fears of the next shoe dropping in Europe and some improved economic data here at home. SPX gained $4 to close at $1216 and RUT closed at $716, up $8. Trading volume dropped from yesterday with 2.8 billion shares of the S&P 500 stocks trading. Trading volume dropped 10% on the NYSE and dropped 2% on NASDAQ.
Initial unemployment claims came in at 366k, down from last week's 385k, while continuing unemployment claims held steady at 3.6 million. We seem to be steadily holding the initial claims number below 400k - a welcome trend. The PPI for November increased 0.3% and capicity utilization remained flat at 77.8%. The Empire Manufacturing Index increased to 9.53 for December from last month's 0.61. All in all, this wasn't resoundingly good news, but it wasn't bad either.
I chose to close the 1350/1360 call spreads in my Jan SPX iron condor today. I was able to take them off for a small gain and basically lock in a reasonably high probability gain for this position. The SPX Jan 970/980 put spreads are far OTM and should expire worthless unless we have a global meltdown of some kind. Assuming the put spreads expire worthless, that will result in a 13.5% gain for this condor - not a bad start for 2012.
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The markets opened up pretty strongly this morning and stayed in the black until after the Fed announcement. SPX closed down $11 at $1226 and RUT lost $15 to close at $718. SPX was as high as $1250 early in the day, but gave it all back in the last couple of hours of trading. Trading volume picked up with 3.1 billion shares of the S&P 500 stocks trading, but that is still below the 50 day moving average. Trading increased 24% on the NYSE and increased 14% on NASDAQ.
The big news of the day was the FOMC announcement. The Fed made the most positive statements about the economic recovery it has made in quite some time (albeit still modest). But many were expecting a QE III program of some sort and were disappointed. Thus, the markets traded off pretty strongly late in the day. The VIX dropped to 23.3% this morning but then moved up in the afternoon to close at 25.4%. The morning reading was the lowest VIX has been since early August.
My Jan SPX iron condor at 970/980 and 1350/1360 stands at a net gain of $1,400 with position delta = -$8 and position theta = +$77. Today's downward move relieved the pressure on the call spreads, so this position is in pretty good shape. But in this volatile market, that could change quickly. The Euro Watch is still in full swing and any manner of news could swing this market one way or the other very easily.
