Weekend Portfolio Analysis (January 31, 2015)

Market Conditions

The market was choppy the past five days with the SPX opening at 2050.42 and ending at 1994.99, down 55.43 or 2.7% for the week.  The SPX is in negative territory for the year, but so far has managed to hold above the resistance level at 1988. All of the other major indices ended the month in the red as well. So much for the January Effect. Volatility has increased nicely with the VIX spiking above 20 during the last three trading sessions of the week.

SPX Daily Chart

March Positions

No changes were made this week to the core portfolio. Although I had placed some orders to close out a couple of the SPX positions, I was never filled due to the expansion in volatility which helped to inflate the option prices. The core positions are all very high probability trades that are very far out of the money (greater than 1 standard deviation). They all still register a positive P&L despite the down move in the market. The core portfolio is as follows:

  • RUT Mar 15 1000/990 Credit Put Spread
  • RUT Mar5 15 1000/990 Credit Put Spread
  • SPX Mar 15 1750/1745 Credit Put Spread
  • SPX Mar 15 1720/1710 Credit Put Spread

The portfolio also consists of some ancillary trades that are fairly high probability trades. These trades are also in the black at this time.

  • SPY Mar 15 208/209 Credit Call Spread
  • EBAY Mar 15 60/62.5/50/47.5 Iron Condor
  • USO Mar 15 20/22/14/12 Iron Condor

Trade Activity This Week

This week I placed two earnings trades. These trades take advantage of selling premium during a period of high implied volatility and then purchasing the position back when volatility contracts after the earnings announcement. The two underlyings that I used were FB and COH. For both of these trades I sold strangles utilizing the weekly options that were closest to expiration. Below you can see my opening and closing trades.

Opening Orders for Earnings Trades

Opening Orders for Earnings Trades


Closing Order for Earnings Trades

Closing Order for Earnings Trades


I closed both trades shortly after the opening bell. The FB trade worked very well. The COH trade ended up being just a little better than a scratch since the stock opened up above my short call. Had I waited until later in the day, I could have closed it out for a full winner, but that easily could have gone the other way as well. Better safe than sorry.

I also closed out the /CL 28 Put earlier in the week. Who knew oil was going to spike up over 8% at the close today? Again, I made a decent profit on the trade, so I am not complaining. Overall, a good week and a positive month. Overall results for January can be seen by clicking here.

Plan For Next Week

I think that there is a fair amount of downside risk in the market at this point. If we experience any rallies next week, I will look for an opportunity to reduce some of my downward exposure in the SPX and RUT. If things start to deteriorate quickly, I will likely sit on my hands and wait to see just how low things might go. At this point, I am not planning to add any more  positions unless they offset or hedge my current positions.

  • disqus_YXfNOvlbpA

    I really like your weekly analysis. It is very well written. As for me, I started to sell April SPX 1750/1740 credit put spreads last. I will look to sell some more April SPX credit put spreads but down in the 1700/1690 level if we sell-off again next week.

    I think we are somewhat oversold on SPX so I feel comfortable selling credit put spreads even though I have many other credit put spread positions. It is wise to trim your positions if you are nervous. I also understand your reluctance to sell more credit put spreads when markets are dropping and there is no end in sight. I have been in the same situation many times. It is always a good idea to wait if you are not sure what is going to happen.

    As for me, I have seen this movie before and know how it turns out. I am also confident in my strategy based on my extensive back-testing. If we have a market crash, I will be able to adjust my current positions with a small loss since they are far in time and distance.