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- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 2003
It is dangerous to short this market. After yesterday's weakness, the markets opened lower this morning in spite of an improved unemployment claims report. One might have been tempted to go short. After all, I read everywhere that a correction is imminent. But the weakness was short lived; by noon the market was back in positive territory, headed for gains on the day. SPX closed at $1219, up $5 and RUT was even stronger, rising $9 to close at $735. Trading volume was flat to down with 3.5 billion shares of the S&P 500 stocks changing hands (right at the 50 dma). Trading volume on the NYSE was down 2% and volume was down 9% on NASDAQ. Initial unemployment claims came in at 435k, down 24k from last week and continuing claims dropped 90k to 4.3 million. This wasn't a great report, but it is starting to show a slow, but steady improvement. As data of slow improvement continues to accumulate and the Fed continues their QE II, it is hard to bet against the bulls.
Not much is changed for my condor positions. The Nov condor is slowly trimming its losses as time decay kicks in. The Dec condor is very well positioned with delta = -$19 and theta = +109. Next week, I am going out to Las Vegas for the Traders Expo; I hope to see you there. If you can't make the trip, my talk will be webcast.
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- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1885
Strengthening of the dollar began yesterday and continued today. This pulled all of the major market indexes back a bit, although some buyers appeared in the last few minutes to recover some of the losses. SPX closed down $10 at $1213 and RUT lost $11 to close at $726. Trading volume was generally up, but trading in the S&P 500 stocks was flat from yesterday and remains below the 50 dma. However, trading on the NYSE increased 22% and also increased 22% on NASDAQ.
My Nov condor continues its underwater journey with delta = -$24 and theta = +$80. I rolled the put spreads up on the Dec condor to better position its Greeks with delta = +$4 and theta = +$111.
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- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1910
The S&P 500 set a record high for 2010 this morning and then promptly gave it all back and chopped back and forth all day. However, it surged near the end of the day to close at $1226 with a modest $5 gain. RUT gained $3 to close at $737. The nonfarm payrolls report was very positive with a gain of 151k jobs and a gain of 159k in private payroll jobs, but unemployment remains at 9.6%. The dollar strengthened today, which provided some of the head winds for the market's attempt to rise farther. Trading volume was flat to down today with a slight rise in the number of S&P 500 stocks traded: 4.7 billion shares. But trading dropped 5% on the NYSE and dropped 17% on NASDAQ.
When the markets pulled back this morning, I took that opportunity to close the rest of my Nov 740/750 call spreads and roll them up to 770/780. That brought the Greeks of the Nov position back in line with delta = -$42 and theta = +$102. The Greeks of the Dec condor stand at delta = -$75 and theta = +$78. The Greeks show the pressure being brought to bear on the 790/800 call spreads. The delta of the 790 calls = 16 so we may be adjusting this position soon if this bullish run continues.
It has been an interesting week in the markets. It seems like everyone, including me, had built up anticipation for the election results and the FOMC announcement, and then largely nothing happened... until the next day! So much for predicting the market's moves - have a great weekend.
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- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 2030
Today was a slow day for economic reports or other market moving news. That combined with a stronger dollar held the bulls in check. The markets opened in negative territory and chopped sideways all day. SPX never fully recovered, closing down $3 at $1223. RUT recovered its losses and closed unchanged at $737. Trading volume reflected the malaise with a decline across the board. The S&P 500 stocks traded 3.2 billion shares, below its 50 dma. Trading volume declined 28% on the NYSE and dropped 14% on NASDAQ. But the underlying bullish strength was revealed in that bears were unable to create a sell-off; it was basically an even match between the bulls and the bears today. So while the bulls may be resting, they have not left the table.
My Nov condor sits at a delta = -$105 and theta = +$254. That large theta will continue to reduce the loss in this position, but it will be a loser for the month. The Dec condor sits at a delta = +$73 and theta = +$73, so the theta/delta ratio is a bit weak. However, the delta of the $780 calls is only 15. The put spreads are about 2.5 standard deviations OTM, so I may consider rolling them up this week.
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- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1934
Yesterday it appeared the markets had priced in much of the Fed's announcement of further quantitative easing, but traders must have reconsidered overnight because the bulls were out in force this morning. SPX jumped up to about $1212 within a few minutes of the open and then just slowly gained all day to close at $1221, up $23. This matched the previous high set in April this year for the S&P 500. Can it break through that high? RUT ran up $18 to close at $733, below its high this year at about $745. Trading volume increased across the board. Over 4.5 billion shares of the S&P 500 stocks traded today, well above the 50 dma at 3.5 billion shares. Volume was up 18% on the NYSE and up 26% on NASDAQ. Today's strong run came in the face of an increase of 20k in initial unemployment claims, but continuing unemployment claims dropped 42k to 4.3 million.
My Nov condor is hurting in the face of this bullish onslaught. I closed half of my 740/750 calls and rolled them up to 770/780 and hedged the position with some Nov $720 calls. The position Greeks are still weak with delta = -$99 and theta = +$113. My Dec condor is faring much better, standing at a P/L of +$460, delta = -$59 and theta = +$83. But my call spreads on AAPL and GOOG are doing very well - testimony to diversification.
