Weekend Portfolio Review (December 19, 2015)

Market Conditions

The Federal Reserve raised interest rates 25 basis points this week ending the longest period (84 months) of near-zero rates in modern history. The markets initially reacted positively to the news, but by Thursday, the party was over. The markets declined significantly on Thursday and Friday giving up all of the gains from earlier in the week. Helping put pressure on the stock market was the continued weakness in crude oil. The SPX opened on Monday at 2013.37 and closed Friday at 2005.55, down 7.82 or 0.38%.


Trade Activity This Week

On Monday, with the drop in crude oil prices, I closed the /CL Mar 60 call for $142.88 profit (18.1% return on capital). I then sold the /CL Mar 58 call for $0.14 ($140 premium received).

With the Fed announcement looking, I decided to restructure some of my risk. I closed the /ES Jan 1915 short put for a small $17.82 loss. This put had been sold as part of the 1915/1895 vertical put spread. I did not close the 1895 long put on Tuesday, choosing to keep it as insurance in the event things got real ugly after the Fed announcement. On Wednesday, after the announcement, I close the 1895 put for a $155.32 loss. In hindsight, I should have kept it, but I think many people were surprised by the big decline after Wednesday’s rally. Also on Wednesday, I closed the /CL Feb 55 call for a $45.76 profit (5.9% return on capital).

Thursday, I was able to close out the /CL Mar 58 call that I sold on Monday for a $62.88 profit (8% return on capital).

Finally, on Friday, I bought back the YUM Dec 72.5 covered call for a $257 profit (11.9% return on capital) and sold the Jan 72.5 call for $2.25. My cost basis for the stock is now well below the current trading price. I had originally planned to completely exit the position at expiration this week. However, there is a $0.46 dividend right around the corner, so I am holding on a few more weeks so that I can collect the dividend as well as additional theta from the new call that I sold.

Plan For Next Week

I will be looking for opportunities to close positions in /ES and /CL this week before the holidays.

The portfolio is up 23.64% for the year versus down 2.59% for the S&P 500 (see Trading Results). The portfolio is currently 31% in cash.

  • The Lazy Trader

    Nice to see the YUM earnings position initially gone bad, was turned around completely. Good trading. After so much hassle I would have closed it all after this. But being close to Christmas/New Year, I guess it is not too much risk to stay in the position to cash that extra dividend.


    • Good to hear that the YUM trade worked out for you Aram. You were able to dig yourself of a big hole. I look forward to your trades and learning from you in 2016.