- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 2062
The markets opened weak this morning on the back of a stronger dollar and some poor news on the unemployment front. New unemployment claims rose from 474k to 496k with the market expecting 460k. Ongoing unemployment claims rose to 4.62 million from 4.61 million with the market expecting a decline to 4.57 million. This sent all of the major indexes significantly lower. But the dollar weakened as the day wore on and the market recovered most of its losses. After plunging as low as $621, RUT closed unchanged at $630, right in the middle of its 625-635 trading range. Similarly, SPX traded down to $1086 before recovering to close at $1103, a loss of less than $2. SPX has strong support at $1100 and resistance at $1116. What strikes me about this market is its lack of direction; it seems trapped in this trading range without a strong bullish case, but also without a strong case for lower prices. The flurry of earnings reports during the past few weeks are similar when you think about it: companies generally have slashed costs to retain earnings but their revenues have actually decreased and their forecasts for growth have not been overly optimistic. Thus, one gets a picture that isn't very bullish when looking forward, but it isn't full of gloom and doom either. So a sideways market isn't too surprising.
My Mar condor stands at -$1,540 and delta = -$67 and theta = +$178 and the April condor stands near breakeven with delta = -$43 and theta = +$83.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 2180
The markets traded down this morning after reading Bernanke's prepared remarks for Congress, but then rebounded and held some of the gains into the close. SPX closed up over $10 at $1105 while the RUT closed at $630, up about $5. Both indexes are still trading within the narrow ranges of support and resistance we have discussed earlier, especially the well defined range for the S&P 500 from $1100 to $1116.
I decided to establish my April iron condor on RUT today. I sold twenty contracts of the 680/690 calls for $1.10 and twenty contracts of the 550/560 puts for $0.85. At the close, this position stands at a P/L of -$80, delta = -$43 and theta = +$78. Both short options are at a delta of 13. Our Mar RUT condor now stands at -$1,720, delta = -$68, and theta = +$161. The 660/670 calls are about one standard deviation OTM and the 570/580 puts are about one and a half standard deviations OTM. The weather is perfect for condors, just muddling along.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 2213
After a day of choppy back and forth trading, the markets closed essentially unchanged on lower trading volume. The SPX closed at $1108 with a decline of less than a dollar, while the RUT closed at $632, up less than a dollar. The SPX appears to be caught in the same consolidation range of $1100 to $1116 as it was from mid-November to mid-December last year. Bernanke's testimony later this week could jolt the market out of this trading range, but I would be surprised if he says anything new.
My March iron condor on RUT stands at a P/L of -$1,540 with a position delta of -$10, and theta = +$115. We will initiate our April positions later this week. I considered selling the April hedges today, but decided we need that protection until we get a least some minimal pullback in RUT. So far, it seems to be stubbornly moving higher, just very slowly.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 2172
The February Consumer Confidence numbers came out this morning and were the lowest since April 2009. That, coupled with a strong dollar, sent the market down and it never recovered. The S&P 500 closed at $1095, down over $13. The SPX price chart shows a channel from $1085 to $1115 that SPX traded within over several weeks in November and December last year. So today's move down stayed well within that range. Coupled with lower trading volume, today's downward move wasn't significant. RUT also lost ground today, falling about $7 to close at $625, right at the support level formed by the double top last September and October.
Today's downward move was sufficient for me to remove the long call hedge on the March iron condor. I sold the two April $640 calls for $12.30, a $660 gain. That brought the position P/L to -$1,980 with a position delta of -$56 and a position theta of +$160. Our adjustments on both sides this month have removed much of our profit potential; the most we can hope for is about $1,800. Our Greeks are looking pretty good; if RUT trades within a relatively narrow sideways range, we may still squeak out a profit. The objective in this business is to minimize losses, not necessarily eliminate them.
- Details
- Written by Dr. Duke
- Category: Dr. Duke's Blog
- Hits: 2157
The Fed's move to increase the discount rate appeared to have the market headed lower as the market opened today, but the market recovered quickly, erased the early losses and closed with modest gains. A surprise decline in the consumer price index this morning probably helped the market's mood. RUT closed up over $2 at $632 while the SPX traded up to $1109. In my opinion, we have not definitively broken through resistance as yet. But, on the other hand, today marked the eighth successive up day for RUT - rather remarkable.
My Mar condor is in pretty good shape after yesterday's restructuring. The P/L stands at -$1,800 with a position delta of +$1 and theta = +$103 - now that's a theta/delta ratio for you! We still have our two April $640 calls in place; they now stand at a gain of $1400. Those calls are responsible for this trade being so perfectly delta neutral.
