- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 2052
Trading in the markets was very choppy today, but with no net change by the end of the day. Trading volume was down 6-10% on the major exchanges. The CPI came in unchanged this morning, good news for those concerned about the Fed's easy money policy stimulating a round of inflation. One could argue that minimal inflation coupled with low interest rates should be a strong stimulus for business and consequently, the markets. From that perspective, this strong market move upward isn't surprising, but the record high unemployment numbers and Fed red ink gives one pause. The initial jobless claims number came down by 1% to 457k while the number of continuing claims rose a few thousand to 4.579 million. But this number does not include workers who have exhausted the "normal" unemployment benefits and moved into the extended unemployment benefits category. The VIX closed at 16.6%, its lowest level since May of 2008. RUT closed down less than $2 at $682 while the SPX closed unchanged at $1166.
Today's pause in the market's ascent was refreshing for my April iron condor position that now stands at a P/L of -$2,685, delta = -$75 and theta = +$120. The $720 calls have a delta of 13, so this position is relatively unstressed at this point; a couple of weeks of consolidation would be helpful after the damage inflicted by this recent rocket launch of the markets.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 2150
The markets opened strong and kept trading up almost all day; some profit taking ensued around 2:30 ET, but the major indexes all closed with solid gains. Trading volume remains average to low; it was up 1% on the NYSE and 6% on NASDAQ; trading volume for the S&P 500 remains at its 50 day moving average. The Producer Price Index dropped 0.6%; that together with further analysis of the FOMC announcement appeared to encourage traders. Lower PPI encourages the inflation hawks and the FOMC language generally put a positive spin on the economic recovery. RUT closed up a little over $4 at $684 while the SPX closed at $1166, up almost $7. Both the SPX and RUT have been tracking along the upper edge of their Bollinger Bands since late February. Whenever I see this price behavior, I keep thinking it has to pull back, but you can incur a lot of damage by trading that belief. Tomorrow brings the CPI and jobless claims reports, but it seems unlikely those reports will derail this train.
I closed the last call positions for my Mar condor today; I will allow the 620/630 puts to expire worthless. After buying 3 hedge positions of long options and rolling spreads up and down nine times, this position ended up with a loss of $2,850 or 19% on twenty contracts. I was too aggressive in removing one of the call hedges at one point and that cost me dearly. The lesson here is that taking a small loss on the long hedge options is much preferable to a larger loss on the spread positions. But, in any case, it is a manageable loss. I was forced to roll the 700/710 calls of my April condor up to 720/730. This strengthened the position somewhat to a positive theta of $125 and a delta of -$87. March and April are turning out to be very tough months for delta neutral traders.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 2126
The markets seemed quiet and cautious as they anticipate the FOMC meeting tomorrow. Trading volume was down about 10% on the NYSE and the NASDAQ. The Empire State Manufacturing Index fell to 22.9 from last month's 24.9 value, and that may have contributed to the market weakness this morning. But the buyers returned to the floor late in the day and drove the markets back up. RUT traded as low as $669, but recovered to close at $674 for a loss of $2. The SPX closed at $1151, essentially unchanged after trading as low as $1141. Tomorrow afternoon's market is likely to be volatile with everyone trying to analyze the Fed's announcement and guess when this period of cheap money is likely to start coming to an end.
My Mar iron condor position continues to lessen its loss each day; today's theta decay is $815. I may be able to hold the loss this month to approximately one month's gain - not a great performance but it meets the goal of minimizing the losses in these extreme months of market movement. Our April condor now stands at a P/L of -$2,175 with delta = -$18 and theta = +$81. Our position is essentially delta neutral and the theta/delta ratio is excellent.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 2090
The Commerce Department reported that new housing starts fell almost 6% in February but the market didn't pay much attention. Traders were focused on the FOMC meeting and their announcement this afternoon. The markets traded up on light volume before the FOMC announcement, then slowly declined most of the afternoon. Then the bulls came on strong during the last hour and drove the market indexes to strong finishes. RUT closed up over $5 to close at $680 while the SPX rose almost $9 to close at $1159. Trading volume was up 9% on the NYSE, 6% on NASDAQ, but fell below the 50 day moving average for the S&P 500. So the bullish trend appears to be intact, but it isn't clear if the institutional traders are strongly engaged; the trading volume seems too muted.
My Mar condor continues to benefit from time decay, but I decided to close my 680/690 calls this morning when the market opened up weak. I left the Apr 660 calls in place until tomorrow. I will probably allow the put spreads to expire worthless. The April position is going to be nearing another adjustment decision point if this bull run continues; theta is still over double the position delta at this point. This continued bullish trend baffles me; I keep waiting for the other shoe to drop, but so far it just keeps moving on up.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 2108
The markets opened this morning and dropped several points, but then recovered and just traded sideways in very choppy fashion all day. A rally in the last half hour of trading brought the markets back to the unchanged mark. I take this last few minutes of trading as a bullish sign since traders did not appear to be taking money off the table for the weekend. Retail sales were reported up for February but the Michigan Consumer Sentiment report surprised traders with a drop for March when they were expecting a small increase. The dollar traded down today, but this didn't seem to fuel the market as it has recently. Trading volume pulled back a bit on the NYSE and NASDAQ, but it remained above average on the S&P 500. RUT closed at $677 down less than a dollar from the open. SPX closed right at its 52 week high of $1150, down $0.25 for the day. My March and April iron condors are largely unchanged at this point as the markets drift sideways. So the question remains: is this bullish rally stalled or just pausing for a moment? But we can only play the market move we see, not what we predict, so we wait.
