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The markets opened down today based on a stronger dollar and some reported bank lending policy changes in China. But bullish sentiment is still predominant. Pullbacks such as today's are viewed as buying opportunities. Support levels have been established over the past couple of weeks for RUT at about $633 and SPX at about $1130. RUT hit $633 at about 11 am this morning and then traded steadily higher to close at $640, down a little less than $10 for the day. The SPX dipped below its $1130 support level twice today, but buyers came in and traded the SPX higher from about 1:15 pm into the close at $1138, down about $12 for the day. However, the predominance of bullish sentiment is of concern; often that is a sign of a market top. But one of the advantages of being a options income trader is that I don't have to predict the market's turns.
My Feb iron condor stands at a P/L of +$2,020, delta = -$17, and theta = +$82. Assuming no big changes in the market tomorrow, I will be establishing at least a portion of my March iron condors tomorrow.
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Apparently the bulls came back from the long weekend ready to buy in earnest. Citigroup's earnings report wasn't very positive in any respect: current quarter losses and a pretty pessimistic outlook. IBM reported earnings that beat expectations with a 9% increase, but this was with only a 1% increase in revenue growth - earnings delivered via cost cutting, not a sign of healthy growth. But the bulls were not to be dissuaded; they took the S&P 500 to new 52 week highs of $1150, up over $14 today. The Russell 2000 index (RUT) also closed at a new 52 week high at $649, up over $11. The previous highs were set last Thursday at $1148 and $646, respectively. These new highs also came in the face of a stronger dollar, a marked change from recent months. All this euphoria worries me.
My Feb iron condor stands at a P/L of +$1,380 with a position delta of -$62 and theta of +$106. The delta of the $690 calls = 11, so we are not yet close to adjusting, but this market seems pretty strong. But we trade what we see, not what we expect.
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Intel and J P Morgan reported better than expected earnings last night, but that didn't seem to be enough for the markets today. The Consumer Price Index only increased 0.1% in December and the Consumer Sentiment Index was essentially unchanged. So the mystery is why did the profit taking take hold today? Trading volume was over 1.4 billion shares on the NYSE, but option expiration probably accounts for much of that volume. The markets opened down and traded down until just before noon, when buyers returned to the market and recovered some of the losses. RUT closed down $8 at $638 while the SPX dropped $12 to $1136. However, today's move leaves RUT and SPX firmly within the sideways channel they have been in since the last week of December, so a new correction or downward trend has not been defined by today's move.
My Feb RUT iron condor now stands at +$1,080 with a position delta of -$30 and theta = +103. Next week will be filled with earnings announcements, so it will be interesting to see if the market has any strong reactions as those play out.
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The complete record of the trades in the account being traded in this blog from May 29, 2009 to date is displayed below. The account began with $40,238 and today's balance is $55,427, a total gain of 38%.
Dr. Duke practices what he preaches.
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The markets traded down for the first hour or so this morning, and then strengthened and slowly gained throughout the afternoon to close with modest gains. The relatively low trading volume of the past few sessions continued today. Retail sales decreased in December and unemployment claims rose, but the market seemed unconcerned. RUT closed up $3 at $646 and the SPX traded up $3 to close at $1148. Many economic reports are due tomorrow; coupled with expiration Friday that may make for a volatile market.
When the market appeared weak this morning, that looked good for my January condors because I didn't want to close my 660/670 calls (I was trying salvage as much profit as I could from a difficult month). But, as the markets strengthened, I closed the 660/670 calls for $0.10 and allowed the 580/590 put spreads to go into expiration to expire worthless. Thus, my low probability RUT iron condor finished essentially at breakeven with +$370 (7%) and the high probability RUT condor finished at +$2,240 (14%).
The Feb RUT iron condor stands at a P/L of +$760, delta = -$66 and theta = +$103. This blog trading account is now up 38% since we started this experiment last May.
