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The markets have been under pressure recently due to concerns about European sovereign debt and some debate over the effectiveness of further quantitative easing by the Fed. But the Korean conflict and continuing tensions added fuel to the fire. Stocks opened down and stayed down throughout the day. SPX traded as low as $1177 before bouncing weakly to close at $1181, down $17. RUT traded down to $720, off $7. Third quarter GDP grew 2.5%, up from the second quarter's 1.7%. But this good news was largely ignored. The FOMC minutes caused minimal reaction in the markets; the Fed cited broad-based evidence of recovery, but it is very modest, and they foresee minimal improvement in the unemployment picture in the short term. Trading volume was flat to down with a modest increase in trading in the S&P 500 stocks to 3.4 billion shares, below the 50 dma at 3.6 billion shares. Trading on the NYSE was down 13% and flat on NASDAQ. The low trading volume suggests the large institutional traders have not yet pushed the exit button in response to the Korean situation, but that could change quickly. The volatility index, VIX, jumped to 21% today, but closed off of its highs.
The Dec condor sits at a P/L of +$580, delta = +$45 and theta = +$107. The theta/delta ratio is still strong and the delta of the $670 puts is at 16, so this position is in good shape thus far in this correction. Now we watch Korea to see what happens next; of course, Ireland, Portugal or Greece could steal the spotlight at any moment as well. In short, there are several potential events that could spark a sell-off - a little disconcerting.
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Concerns over European debt problems and the foreclosure crisis in the states appeared to dominate traders' thinking today as stocks struggled to stay positive. The SPX hit a low at $1185 before rebounding to close at $1198, down $2. RUT was more positive, closing up $3 at $727. Trading volume was flat with 3.2 billion shares of the S&P 500 stocks trading and volume declined 18% on the NYSE. Trading volume on NASDAQ increased 2%. The support that was found for the SPX is a positive sign that this correction may have run its course, although this market defies prediction. The only certainty is volatility.
My Dec iron condor is in excellent shape with a P/L of +$640, delta = +$13 and theta = +$136. It seems hard to believe that we will be looking at January options positions soon. Where did this year go?
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Wow! The market's concerns about Ireland and European sovereign debt sure went away in a hurry. The volatility of this market just continues to amaze me. SPX surged ahead $18 to close at $1197 and RUT closed at $721, up $13. And these gains were made on strong volume. Trading on the NYSE increased 30% and increased 12% on NASDAQ. The S&P 500 stocks traded 3.7 billion shares, above the 50 dma. The VIX dropped over three points to 18.75%. Such a strong move on increased volume with a large decrease in the VIX
is certainly bullish, but one has to wonder about this market's fickle behavior.
My Dec iron condor is trading at about breakeven with a delta of +$3 and theta = +$66. I removed my put hedge today, but one still has to watch this market closely.
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[I was speaking yesterday at the Traders Expo and thus this blog is late]. The markets opened down yesterday morning, somewhat in reaction to the strength of Thursday's markets. But by mid-morning much of the loss had been recovered and the major indexes closed for the day either even or up slightly. SPX closed up $3 at $1200 and RUT closed at $724, up $4. Concerns about Ireland's debt situation and China's efforts to rein in inflation continue to weigh on this market. Friday's price action was encouraging, suggesting that many traders saw the morning lows as a buying opportunity. Trading volume was down, in spite of options expiration. Trading in the S&P 500 stocks came in at 3.2 billion shares, below the 50 dma. Trading on the NYSE and on NASDAQ both dropped 10%.
My Dec iron condor on RUT stands at a P/L of +$560, delta = +$32 and theta = +$100. This position is nearly perfectly positioned and the theta/delta ratio is excellent. At times like this, the condor trader knows time is on his side.
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The markets opened lower primarily over concerns over European sovereign debt, especially Ireland's situation. But unlike other recent days, there was no bounce in the first few minutes; the market plunged all morning and then traded largely sideways the rest of the day. SPX lost $19 to close at $1178. RUT closed at $705, down $15. This places both of these indexes well into the consolidation range in October that preceded the run-up from anticipation of the Fed's quantitative easing operations. The bad news is that there is room to drop before we hit support for SPX in the area of $1165 and RUT at approximately $690. Today's severe drop occurred with increased volume, which underscores the bearishness of the recent moves downward. Over 4.3 billion shares of the S&P 500 stocks traded today, well above the 50 dma at 3.6 billion shares. Trading on the NYSE increased a whopping 51% and it increased 19% on NASDAQ. Commodities were also down today, including a 2.3% drop in gold.
I closed half of the put spreads in my Dec iron condor on RUT and also hedged the position. At the close, this position stood at a P/L of +$265 with a delta = -$27 and theta = +$15. I will give this market a few days to settle down before entering new put spreads. I closed all of my GOOG spreads today, but I am still holding several AAPL positions. So now we watch to see where the bottom of this move may be.
