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The dollar's strength, coupled with concerns about European debt, held the equity markets down today. SPX traded down $10 to close at $1333 and RUT traded down $6 to $829. The SPX settled at $1342.55 for May options and RUT settled at $831.14. Thus, the remaining 720/730 and 920/930 May RUT spreads from my condor have officially expired worthless. So the May position closed with a 7% gain and my condor trading is up 19% for the year; by comparison, SPX is up about 5%.
One can read the SPX price chart in two somewhat different ways. One would be to identify the trading range of $1320 to $1370 that SPX seems to be trapped in for the past month or so. An alternative view would draw trend lines along the tops and bottoms of the bars since May 1 and propose a new downward trend. A trader with the first perspective would be looking for a break-out either above $1370 or below $1320 to define a new trend to trade. The latter perspective would be looking for a break-out above $1345 to resume the bullish trend.
My June iron condor on RUT stands at a P/L of +$1,716 with delta = -$17 and theta = +$75.
Have a great weekend. It is finally warm in Chicago!
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The markets opened up positively this morning and steadily climbed all day, closing near session highs. SPX tacked on $12 to close at $1341. Not to be outdone, RUT gained $13 to close at $833. Volume continues to be rather low. Today's strong run involved 2.8 billion shares of the S&P 500 stocks, down from yesterday and still below the 50 dma. Trading volume was down 10% on the NYSE and was down 15% on NASDAQ. The FOMC minutes were released this afternoon, but didn't really offer any new insights to the committee's thinking. No other economic news of any import was released today.
My June iron condor on RUT stands at a P/L of +$1,956 with position delta = -$31 and theta = +$47.
I have had an interesting trade on AAPL during this past few weeks of a disappointing price chart from AAPL. In February, with AAPL at $355, I bought 5 contracts of the AAPL Jan 12 $350 calls. I later sold the Feb $360 calls against the position, then I rolled those out to March and the Mar $360 calls expired worthless. Then I sold the April $340 calls and rolled those to May $340. Now the cost basis of my LEAPS is $10.15 (assuming the May $340 calls expire worthless). Depending on the price action the next couple of days, I may roll the May calls out to June. If I assume the May calls expire worthless, then the Jan 2012 $350 calls could be sold for a 43% gain, whereas if I had bought AAPL stock, I would be down about 5% and if I had just held the LEAPS, I would be down 34% (ouch!). This illustrates the leverage (both ways) when using LEAPS for your long term bullish plays, but perhaps more importantly, the power of selling calls against that position during times of weakness.
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The equity markets sold off pretty strongly today, led by tech stocks. SPX closed down $8 at $1329, right at its support level at about $1330 - $1335, set in early April and mid-May. An open tomorrow farther down may be a very bearish sign for this market. RUT closed at $823, down $13. RUT is in a similar position as SPX on its chart having closed just below the lows set in early May and approaching the $815 low of mid-April. As in previous down sessions, trading volume remains anemic with 2.7 billion shares of the S&P 500 stocks. Trading on the NYSE was up 1% and was up 7% on NASDAQ. So we have traded to the bottom of the trading range; which way will it tip?
The NY Fed Empire Manufacturing Index plummeted to 11.9 for May from last month's 21.7. Otherwise, there were minimal economic data reports today.
My June iron condor on RUT stands at a P/L of +$1,276 with a position delta = -$9 and theta = +$84. This condor is well positioned as the market sits at this tipping point; the puts spreads are way down at 690/700. The 900/910 call spreads are now about 1.5 standard deviations OTM. So we watch to see if the bullish trend resumes or the correction deepens, but our condor is in good shape.
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The markets opened lower this morning and traded downward until around noon and then the bulls woke up and started buying, taking the markets back near the opening levels. SPX sliced through the 50 dma and dipped as low as $1319 before rebounding to close unchanged at $1329. RUT traded down and bounced off support at $815, closing down $3 at $820. All of this action occurred on higher trading volume levels with the S&P 500 stocks trading 3.1 billion shares, just below the 50 dma at 3.2B. Trading on the NYSE was up 10% and up 7% on NASDAQ. Many technical indicators are nearing oversold conditions, but the current bias appears to be downward. However, the fact that today's strong downward move didn't turn into a very ugly day has to be encouraging. Perhaps we have just expanded the lower band of our trading range?
Lower housing starts were reported for April (523k, down from 585k) and fewer building permits were issued in April (551k vs. 574k in March). Industrial production was flat for April, down from a 0.7% increase in March. Capacity utilization was almost flat at 76.9% in April vs. 77% in March. This economic data may have contributed to the weakness in the markets this morning. Some analysts believe the weakening of the dollar later in the day contributed to the market's rebound. But we may be reading tea leaves here, hoping to feel more confident that we have found the cause and effect relationship.
My June RUT iron condor at 690/700 and 900/910 stands at a P/L of +$1,716 with delta = -$14 and theta = +$60. This position remains delta neutral with a fair amount of safety margin to the upside (about 1.5 standard deviations) and a large amount of room on the downside (about 2.5 standard deviations). All in all, this is a difficult market to be trading now - unless you are delta neutral. But even then, the volatility can be a bit unnerving.
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The markets opened basically flat this morning but quickly turned south when the dollar strengthened. SPX lost $11 to close at $1338 while RUT dropped $12 to close at $836. Trading volume was down across the board with 2.8 billion shares of the S&P 500 trading.Volume dropped 6% on the NYSE and dropped 13% on NASDAQ. The CPI increased 0.4%, in line with analysts' estimates. The University of Michigan Consumer Sentiment Survey reported an increase to 72.4 in May from April's 69.8. But traders seemed to ignore this economic data and just took their money off the table. Although the low volume suggests the institutions are largely sitting on the sidelines.
I applied my "Two Sigma" rule to the remaining spreads in my May iron condor on RUT. The 920/930 call spreads are over three standard deviations OTM while the 720/730 put spreads are over four standard deviations OTM. So I will allow both spreads to expire worthless and book an 8% gain for May. This brings the recommendations of the Flying With The Condor™service to a 19% gain for this year, handily beating the S&P 500 which is up a little over 6%. The June iron condor on RUT stands at a P/L of +$756 with position delta = -$53 and position theta = +$92.
Have a good weekend.
