3/15/19

Weekly Recap and Look to Next Week

Last week we said we thought the market would either drop into a range or move up. Truthfully, I thought I would move up gradually off support back toward the high. I was somewhat surprised by the strength of the move on Monday and the fact that it really kept pushing up all week. Yes, Thursday was a little bit of a ‘catch your breath’ day but not a pull back.

Because we were expecting a move back up we were watching a few of our trades very carefully. More on that later.

Butterflys

Our short trades are about 50/50 right now half are showing a profit and half a loss. We are not really worried about them at the moment, but will need to pay attention to time decay next week.

Strangles

Closed one for target profit this week and had to defend another by rolling it up and out two weeks. Overall all the trades look pretty good. We have been doing so well with our strangles that we have to keep reminding ourselves not to overtrade them.

If you pick the right stocks, strangles are great trades and relatively easy to defend. The problem is they lull you into a false sense of security because 90% of the time everything stays within your trading plan. But, 10% of the time if the market falls apart quickly you can get into a lot of trouble with strangles if you are over trading.

We just have to keep reminding ourselves of that while things are going well.

Credit Spread – Index

Closed our NDX credit spread at target profit and opened another because of our SPX iron condor problems. Right now it is showing a loss but the delta is really low and time decay is our friend.

Iron Condor – Index

This SPX cycle has been a huge problem for us. We made a mistake while making our first roll and the ensuing market action has made us pay. We had a couple of opportunities to get out with fairly small loss but passed.

This week we had to roll lasts Friday to protect our Puts and this week the market turned and took off hard in the other directions putting our Calls in danger. We looked at a number of rolls, but in the end we decided to just take the loss and move on.

We ended up with a 34% loss on this Iron Condor. We are still trading these with a 80.5% success rate but the past 3 cycles have been very frustrating.

Next week we will probably jump in with another for the next cycle depending on what SPX does but will reduce our risk.

Diagonals

Still no new trades. We tried to get into a couple but did not get the fills we wanted. Mainly this is because of how fast the market moved up. We don’t want to trade these when the market or security is at the top of a move up. We want it to pull back to support or at least the middle of the expected range.

SPY

We skipped a trade set up Monday afternoon, and questioned the one Thursday so we did not have any new entries. I think fighting with our SPX Iron Condor affected our ability to trade this week.

Next week.

We expect continued strength but expect either a pull back or some sideways action at some point. The market has moved into the channel it was in before it pulled back last week.

If we continue to see strength without any pull back or sideways action we will remain on the sideline with most of our trades.