April 18th, 2019
Weekly Recap and Look to Next Week
Last week we said be careful this week and I think that played out like we expected. We got a move but had down closes in SPY 4 out of 5 days. We eventually to a support level and SPY bounced off of it for a close toward the top of Friday’s candle.
The consolidation and pull back relieved some of the indicator warning signs we were concerned about last week. There is still some concerned but not enough for us to point at the indicators and say the sky may fall. It may, but it is not as clear now.
Closed one of our short butterflys for target profit and another for a loss. The gain and loss cancelled each other out for the week. The butterflys we still have on are showing losses right not but there is still time to let them run for now.
Closed one of our strangles that we had to adjust for just above BE this week. Annualized it was still a pretty good gain because we weren’t in it that long. We had to adjust SMH again and decided to increase our risk and move up instead of adding more time. We also added a broken wing iron condor in SMH as a hedge trade.
We are only at about 25% of our total strangles right now, we may stay around that level because we are adding some futures trades to the portfolio.
Credit Spread – Index
Don’t have one right now but may add one in SPX if our NDX Iron Condor gets in trouble this cycle.
Iron Condor – Index
Our NDX trade improved this week as the market pulled back. Still not very happy about our delta to the upside but we will have to wait and see what happens.
Iron Condor – Probability
Closed one for target profit and another for a small profit because of an earnings event next week. The rest are all showing a profit right now, just waiting on time decay.
Closed two for around target profit this week. Got in trouble with another one because of a huge down day. We tried to close for a loss but it just kept growing and we decided to hold for now because we really like the stock. We will see if this works out for us.
Historically, when we decide to fight our way out of a bad position we claw back to break even about 70% of the time, eventually! However, the 30% of the time we don’t tend to be fairly large losses.
Honestly, we probably should have just closed it.
We have traded futures in the past and have decided to add those back to our portfolio because we found a good broker that gives us pretty good commissions on futures options. That has always been what we hated about futures options, the fees.
This week we sold a Crude Oil naked put that expires in about 30 days. It is showing a 95% probability of success.
TEST TRADING SYSTEMS
We actually had three potential signals this week. The first one was Monday, but it was pointing to a long and we felt our indicators negated it. The next, and best one was Wednesday. If we had taken it and closed fast Thursday it might have worked out for us. Although it was a really good signal we skipped it. In truth we were busy fighting with our run away diagonal and decided not to add pressure to the day.
The next potential signal was on Thursday but it is pointing to a long which we are not committed to yet and Friday was a holiday making it not only a weekend trade but a long weekend trade. We decided to skip.
We closed our first cycle of trades with this strategy and it performed really well. The trades were about 50/50 as far as wins and losses. However the profitable trades brought in more than the losses. Overall we got about a 25% return over the 30 days in the cycle.
We added trades for the next cycle already. Thursday the group was showing a loss but it is still really early.
Overall our Delta improved, primarily because of our Diagonal going negative and the NDX pulling back.
Having a long weekend to digest makes predicting next week a little more difficult. Pressure was relieved off of our indicators so they are not showing a major down move is indicated. Of course, indicators are not always correct.
The price action on Thursday seems to point toward an up move. The candle finished at the top of the range and price bounce hard off of a support level.
There are two major support and resistant points that price is still between. One is the 52 week high for the SPY of 293.94 and the other is a weekly trend line showing support around 285 to 288 depending on the day next week.
Right now, if I had to make a buy/sell decision on the SPY I would go long using 288.75 as a near term support break. On the upside I would consider taking profits at about 291.25 and letting the rest run after moving my stop to BE.