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The markets continued their steady uptick today. Alcoa kicked off a positive session with better than expected earnings. But a weak T-bond auction put the brakes on in afternoon trading. RUT traded as high as $612, but closed at $608, while the SPX traded as high as $1071 but closed at $1065. The 2009 highs set a few weeks ago will serve as the next resistance levels this market must break to remain on this bullish trend: RUT = $625 and SPX = $1080. The dollar continued to trade downward and this pushed commodities to new highs; Gold closed at $1056. The question in my mind is when does a weaker dollar begin to weigh on this stock market?
I decided to take advantage of this market strength and roll my Nov 500/510 put spreads up to 520/530. I closed 20 contracts of the 500/510 puts for $0.55 ($640 profit) and opened 20 contracts of the 520/530 puts for $0.75. That brings my Nov condor to a P/L = +$660, delta = -$17 and theta = +$89. My Oct condor is still plugging along at a P/L of +$400, delta = +$3 and theta = +$94. My Oct 660/670 calls are just outside of two standard deviations OTM. If this market continues trending upward, I may have to close those calls. I will take a hard look at that question tomorrow afternoon.
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The markets traded most of the day in negative territory, but ended the day slightly up. RUT closed at $602 and the SPX closed at $1058. The markets continue on the bullish trend, albeit consolidating to a large degree lately. All in all, this is currently a good market for delta neutral strategies - a welcome relief from the strong trending market of a few weeks ago.
My Oct condor
hasn't changed much from yesterday, but theta is starting to build as we near the final week of the October options' life: P/L = +$130, delta = +$18 and theta = +$135. Both short strikes are outside of two standard deviations at this point. The Friday before expiration is the time when I apply my "close or let go" decision. I will close positions that are under two standard deviations OTM; spreads that are greater than two standard deviations OTM will be allowed to expire worthless (but watched carefully). My Nov condor stands
at a P/L of +$1,020, delta = -$11 and theta = +$76. This condor is positioned well right now, but we still have 43 days for the market to move against us. Stay tuned.
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The markets opened this morning and traded pretty choppily (if there is such a word) most of the morning, but afternoon trading was generally steady and strong. RUT gained $11 to close at $591 while the SPX gained $15 to close at $1040. The talking heads were all nervous before the opening bell this morning, wondering if last week's action was the beginning of a significant correction of 10% or more. I don't know what tomorrow may bring, but today's market appeared pretty solid. It seems the bulls who brought the market this far are still largely bullish and are content to just pause and consolidate, rather than take their profits and go to cash.
Today's market was kind to my condors. The Oct condor now stands at a P/L of -$395, delta = +$46 and theta = +$123. I may scratch out a profit from Oct after all! The Oct call spreads are now over two standard deviations OTM and the Oct put spreads are about one and a half standard deviations OTM.
My Nov condor now stands at a P/L of +$800, delta = +$5 and theta = +$68. So the Nov position is looking good so far.
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Well, there is no doubting that we bounced off support at this point. RUT closed at $602, up almost $11 and the SPX closed at $1055. There was virtually no big economic news today. Some pointed to the Aussies bumping up their central bank's lending rate as an indication that the global economy is rebounding. But the important rule to always keep in mind is: don't try to predict or rationalize. Just trade what the market gives you.
This market is giving my condors exactly what they needed, moving the RUT back very close to equidistant between my spreads. The Oct condor has a P/L of +$160, delta = +$21 and theta = +$91. Each of the short strikes are now over two standard deviations OTM. My Nov condor stands at a P/L of +$470, delta = -$10 and theta = +$79. The Nov short strikes are each over one standard deviation OTM.
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As many expected, the jobs report wasn't pretty, but the market didn't panic. From a technical perspective, support held and the underlying bullish sentiment still appears to be holding. RUT closed at $580, down about $4 and right at its support level set several weeks ago. Similarly, the SPX closed down at $1025, within the support range set in late August.
I sold my Nov $570 put for $21.30 ( a $30 loss). I purchased this put yesterday morning to protect against the slide ongoing in yesterday's market and as insurance for this morning's reaction to the jobs report. My Oct condor could still use the protection, but my short $550 put is now one standard deviation OTM and I don't have much profit left in this trade to pay for the insurance. When it appeared the RUT had settled at support, I took a risk and sold the long put. My Oct condor now stands at a P/L of -$1,415, position delta = +$72, and theta = +$116. A delta/theta ratio of about 1:1 is one of my "lines in the sand". This condor needs several days of sideways trading to salvage a profit. The Nov condor stands at a P/L of +$100, position delta = +$21, and theta = +$66. These Greeks look good, but we still have a lot of time exposure in this position. Next week appears to be a little less loaded with heavy economic reports so maybe we can catch a breather.
