
Daily Market Newsletter
October 15, 2016Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
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October Expiration
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Market Commentary
Once again Janet Yellen spoke at a press conference on Friday, stating that we might need to run a “high pressure” economy. I searched around and tried to find exactly what this meant without specifics, but my guess is that we continue to let rates stay low and let inflation ramp up a little bit before trying to put the clamps on it via hikes. Another speculation by Yellen herself is that the FOMC might begin to buy equities, and not just treasuries like before.
If we don’t start seeing real growth soon, then who’s to argue with the track record of the FOMC? They have made very specific actions to propagate this “wealth effect” thinking that if they kept rates low and money found its way into equities, that they could stimulate a 1999-like economy. Well, this was great in theory but only the investor class of society was able to benefit, actually harming the middle class that could no longer count on savings.
But I think that there’s an excellent chance that some form of exogenous risk will hit the markets over the next month as this election cycle gets nastier, and we get into the meat of the earnings cycle. Something’s gotta give. In a perfect world we see a relatively quick/violent downdraft, and then the Fed steps in and we’re off to the races. This scenario makes sense to me with the rampant amount of skepticism out there, which usually supports higher prices to the disbelief of the majority herd.
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Offensive Actions
Offensive Actions for the next trading day:
- I’m going back to the well with another QQQ debit put spread; see the “bearish/fade” section below.
- I’ll set up a new LP Iron Condor on the SPX; see “LP Iron Condor” section below for details.
Defensive Actions
Defensive actions for the next trading day:
- Very little to “defend” or manage at this point. Any vertical debit spreads that we set up are risk-managed from day one.
Strategy Summary Graphs
Each graph below represents a summary of the current performance of a strategy category. For an explanation of what the graphs mean, watch this video.
Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
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Technical Analysis Section
Position Management – NonDirectional Trades
Let’s fire up another LP Iron Condor on the SPX. While we’re still staring down the barrel of a very large move, price is just range-bound right now and might continue to be until very close to the election, when the “Market” will proclaim a winner and start to run….or will crater on the risk. Either way I don’t see the price breaking the range just yet.
On Monday morning I will enter the following position:
- SPX 11NOV 2080/2085*2185/2190 LP Iron Condor – I will enter this position asking for a minimum $2.50 credit, and might have to move my strike prices around on Monday morning to accommodate the gap. I will seek a 10% return on risk for this trade and will not defend this trade in any manner. .
- SDS Stock – I still own 100 shares of this stock from 2011 and will continue to write calls against this position with every correction/pullback.
- VXX Stock – I own 12 shares of this stock and will hold until Armageddon occurs.
- SLV Stock – I have 1000 shares of the SLV that was assigned at the $15 level, and will continue to write time against these shares on every rally. I wrote 21OCT 20.5 calls (9/7) against half of my position for a $.21 credit.
- SSO – Waiting for the next pullback to sell puts against the SSO, preferably at the 50 level or lower. .
Nothing to do at this time with current positions.
Position Management – Directional Trades
I have the following positions in play:
- QQQ 11NOV 118/120 debit put spread (10/10) – I entered this trade by buying the 120 put and simultaneously selling the 119 put, for a .79 debit, and closed this position (10/13) for a $1.22 credit. This trade gave me a net profit of $41/contract or a 51% return on capital.
I’m going to go back to the well one more time with another bearish position! I will enter the following position on Monday morning:
- QQQ 11NOV 116/118 debit put spread – I will enter this trade on Monday morning, paying about an $.80 debit, and adjusting the strikes up or down to approximately “center” the price. I will look for about a 50% return from this trade.
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I see many stocks showing a nice pattern, like MRK and UPS, however no concrete signals just yet. Markets are coiling up into the next range and are about to show their next hand. I’ll look for more opportunities this weekend.
To remove the current series of puts, I will look for a move down to and below the SPX 2100 level.
I never got the upside “burst” to allow me to sell call spreads above SPY 230 that I wanted; now I can concentrate on selling put spreads at some level below SPY 200.
We currently have the following positions in play with this strategy:
- SPY OCT 194 Long Puts – I entered this position (7/18) for a $1.52 debit.
- SPY NOV 197 Long Puts – I entered this position (8/22) for a $1.56 debit.