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- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1907
The markets opened lower this morning but quickly recovered most of that early loss and traded sideways until after the FOMC minutes were released. The language is pretty vague, but discussions of further quantitative easing were discussed as perhaps being required "before long". But traders grabbed that life line and bought stocks, assuming that QE II will not only sail, but have the desired effect. Economists are divided, but many believe the effects on the economy will be modest. SPX traded up $4 to close at $1170, while RUT closed at $696, up $4. Trading volume also shot up across the board with a 13% increase on the NYSE and a 26% increase on NASDAQ. Trading volume in the S&P 500 stocks hit 3.6 billion shares, above the 50 dma.
My Oct condor continues to limp along; absent a market pull back, I will be forced to close the call spreads tomorrow. The Nov condor stands at a P/L of -$1,486 with delta = -$103 and theta = +$83. Another up day on RUT will necessitate some adjustments to this position.
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- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1963
The markets opened down this morning and after chopping sideways for a couple of hours, they headed higher. But a large sell-off late in the day brought the major indexes back to where they started. SPX closed unchanged at $1165 and RUT closed at $693, also unchanged for the day. The SPX candlestick for today was the classic doji, often suggesting a turning point based on the indecision or stalemate between the bulls and the bears suggested by the day's trading pattern. However, trading volume fell way off, making it dangerous to base any predictions on today's price movement. Trading in the S&P 500 stocks dropped to 2.5 billion shares, way below the 50 dma at 3.3 billion shares. Similarly, trading on the NYSE was down 12% and down 23% on NASDAQ.
My Oct iron condor on RUT continues its underwater journey, although each day is helping the position due to its +$325 theta. The Nov condor is in fairly good shape with a P/L of -$1310, delta = -$84 and theta = +$92. The fact that delta is of the same order of magnitude as theta shows that the position is on the edge of requiring adjustment if RUT trades higher.
I think traders are still trying to sort out whether Friday's jobs report was bad news or good news. In any case, today's market couldn't find a direction.
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- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1897
Markets traded mostly sideways today with most traders focused on the nonfarm payroll report tomorrow morning. Initial unemployment claims reported essentially flat week to week at 445k and continuing claims decreased by 48k to 4.5 million. However retail sales appear to be making solid gains and that news
appeared to offset the lack of improvement in the unemployment claims
data. RUT lost $1 to close at $684 while SPX lost $2 to close at $1158. Trading volume declined across the board with 3.2 billion shares of the S&P 500 stocks changing hands. Trading on the NYSE dropped 5% and it declined 12% on NASDAQ. The dollar recovered somewhat today and that pressured gold prices. With bond yields at record lows, there is a lot of money on the sidelines considering whether it is safe to buy stocks. It is impossible to predict what piece of news, or more importantly, the interpretation of that news, will push this market one way or the other. Alcoa's earnings announcement certainly wasn't very encouraging with a 21% drop in earnings; however, they beat analyst expectations, so that may be a positive boost for stocks tomorrow.
The situation with my Oct and Nov iron condors on RUT is largely unchanged. Both are underwater and susceptible to a strong move upward. Both positions are hedged and we'll see what the jobs report does to the markets tomorrow.
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- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1953
Initially the market faltered on the news of a loss of 94 thousands jobs and unemployment remaining at 9.6% in the September nonfarms payroll report. But then the consensus view saw this bad news as good news because it would likely prompt the Fed to further intervene via additional quantitative easing. This viewpoint sent the dollar plunging and that in turn helped the stocks rally strongly. It was certainly a surprising interpretation of the jobs report for me - but, I don't claim to be able to predict the market's twists and turns. The SPX rallied $7 to close at $1165 while RUT ran even harder, closing at $694, up $10. Trading volume was flat to modestly higher, depending on the exchange. Volume was only up 2% on the NYSE, but it was up 9% over at NASDAQ. Trading in the S&P 500 stocks was flat at 3.2 billion shares, just below the 50 dma.
My limping Oct condor was crushed by today's move. I didn't help matters when I removed the long Nov hedges this morning as the market dropped. I closed half of my 700/710 call spreads and will close the remaining call spreads next week. The only remaining question is to determine the size of the loss for October. I also removed the hedges on my Nov condor, but that was of minimal consequence for that position. However, by the end of the day, the short Nov $740 calls closed with a delta of 21, so this position will require more surgery next week, absent a pull back.
Enjoy your weekend.
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- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 1962
The markets cooled today after seeing the loss of 39 thousand jobs in the ADP payroll report for September. Economists were expecting an increase of 18k. This has exacerbated concerns about Friday's nonfarm payrolls report; the consensus prediction from the experts is for an increase in unemployment to 9.7% and some are speculating it may go higher. Tomorrow's unemployment claims report may push the market somewhat but most traders will be waiting for Friday's jobs report before taking on additional long positions. Markets opened downward this morning and traded sideways throughout the day with only modest net changes in the market indexes. SPX closed down less than a dollar at $1160 while RUT lost $4 to close at $685. Trading volume decreased across the board with a decline to the 50 dma at 3.4 billion shares for trading in the S&P 500 stocks; similarly, trading was down 18% on the NYSE and down 5% on NASDAQ. Gold hit record highs today, reflecting continued concerns about governments debasing their currencies both to stimulate exports but also to solve their sovereign debt problems.
My iron condors for Oct and Nov are both underwater and hedged appropriately. The Oct condor's position delta = -$40 and theta = +$173, representing a reasonable net level of risk. November's Greeks are delta = -$32 and theta = +$54. Both theta/delta ratios are good to fair, especially in light of the hedge options in both positions. A strong market move upward is the danger to both positions; uncertainty concerning Friday's jobs report will likely contain any market advances tomorrow, but on Friday? But, as delta neutral traders, we have hedged our positions; if the market moves up strongly, that will likely lock in a net loss for our October condor, but the hedges should contain that loss.
