Live: Friday, Aug. 30, 2019

3:15 p.m. New York time

I’ve updated XLY Analysis with results.

2:50 p.m. New York time

I’ve exited my last remaining position built from options expiring September 20. The short iron condor was on XLY, and I exited for a $0.82 debit. Results to come shortly. The exit came 21 days prior to expiration, which under my rules is the day I manage all winning trades. In XLY’s case, the exit came at 9.9% of maximum potential profit.

By Tim Bovee, Portland, Oregon, August 30, 2019

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Live: Tuesday, Aug. 27, 2019

12:55 p.m. New York time

Some housekeeping notes (not quite up to Marie Kondo’s standards).

I have one options position remaining using the monthlys expiring September 20: XLY. It was entered into relatively late in cycle, with nine days remaining until the manage winners day, 21 days prior to the options’ expiration. Normally I aim for 20-23 days before manage winners day.

XLY is not showing a profit. My goal is to exit at 50% of maximum potential profit. On manage winners day, I’ll exit XLY if it is profitable to any degree. If it is not profitable, then I keep the position, but the rules for it change to the sudden death rule set: If it shows a profit to any degree, I exit, and if the underlying share price moves beyond the profit zone, then I exit if the time required for return to the zone is greater than one day, as measured by the Rate of Change metric.

I’ll start populating my accounts with short iron condors built from options expiring October 18 when we reach 45 days prior to expiration, which is September 3, a week from today.

See my options trading rules here.

By Tim Bovee, Portland, Oregon, August 27, 2019

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Live: Monday, Aug. 26, 2019

3:40 p.m. New York time

SPY results posted.

3:25 p.m. New York time

My exit order on my long iron condor on SPY has been filled for $0.76. Results to come.

11:25 a.m. New York time

I’ve updated the analysis of my GDX iron condor with results.

11:05 a.m. New York time

I placed an exit order on my GDX short iron condor. It was filled for a $0.22 debit, or 50% of maximum potential profit. Results to come.

10:50 a.m. New York time

In my options portfolio, I put in an exit order on my short on iron condor on SPY for a $0.76 debit, which is as yet unfilled.

In my managed shares portfolio, XLU gave a sell signal late Friday on the Directional Movement Index (DMI), and I exited for $61.76, a return of 0.4% over six days, or a +24% annual rate.

I replaced it with UNG, which a DMI buy signal this morning. The entry price was $19.17.

The new line-up is still a bit heavy on the metals, but that’s the nature of the market these days.

sym slot # entry $/share sector
GLD 1 143.03 metals
SLV 2 15.88 metals
IYR 3 91.44 real estate
UNG 4 19.17 energy
BIDU 5 112.22 technology

By Tim Bovee, Portland, Oregon, August 26, 2019

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Live: Wednesday, Aug. 21, 2019

10:40 a.m. New York time

I’ve entered a short iron condor position on XLY, selecting it as having the top implied volatility rank of any prospect on my list that isn’t a metal or an energy play. The position replaces IWM, which I exited yesterday for half of maximum potential profit. The position has 30 days until expiration, nearly two weeks short of my preferred 42 days.

By Tim Bovee, Portland, Oregon, August 21, 2019

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XLY Analysis

The Consumer Discretionary Select Sector SPDR Fund (XLY)

Update 8/30/2019I exited my short iron condor position on XLY for a small profit at my normal time for managing winning trades: 21 days before the options expire. The exit cost was a $0.82 debit, providing a $0.09 profit, with shares trading at $119.54, up $0.19 from the price at entry. The exit price was at 9.9% of maximum potential profit.

Three days after I entered the position the underlying share price fell sharply down to $116.49, turned unprofitable as it fluctuated around the $118 level before rising to slightly above my entry point and returning to profitability.

Shares rose by 0.2% over nine days, or a 6% annual rate. The options position produced an 11.0% return for a 445% annual rate.


I have entered a short iron condor spread on XLY, using options that trade for the last time 30 days hence, on September 20. The premium is a $0.91 credit and the stock at the time of entry was priced at $119.35.

The profit zone for this position is between $124.41 on the upside and $108.41 on the downside.

The implied volatility rank (IVR) stands at 36.9.

Premium: $0.91 Expire OTM
XLY-iron condor Strike Odds Delta
Long 127.00 97.0% 6
Break-even 124.41 89.0% 12.5
Short 123.50 81.0% 19
Puts
Short 114.00 81.0% 19
Break-even 108.91 87.5% 12.5
Long 108.00 94.0% 6

The premium is 19.2% of the width of the position’s wings.

The profit zone covers a 4.2% move to the upside and a 9.6% move to the downside of the entry price, for total coverage of 13.8%

The risk/reward ratio is 4.2:1, with maximum risk of $384 and maximum reward of $91 per contract.

By Tim Bovee, Portland, Oregon, August 21, 2019

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Live: Tuesday, Aug. 20, 2019

2:05 p.m. New York time

I’ve updated IWM Analysis with results.

1:50 p.m. New York time

I’ve exited my short iron condor options position on IWM at 50% of maximum potential profit; a $0.90 debit. Results to come.

12:30 p.m. New York time

Three of my short iron condor options positions — IWM, QQQ and SPY — have moved within 10 percentage points of my target, which is 50% of maximum potential profits. I’ve entered exit orders on all three, at the 50% mark, which have not yet been filled.

10:20 a.m. New York time

I’ve moved beyond my reliance on exchange traded funds for my manage shares portfolio, entering a position on BIDU, the Chinese Internet company, for $112.22 per share. It’s something in a nature of an experiment and the extent to which I’ll mix in shares in individual companies will depend upon the results I get from these occasional forays. The broader universe from which I choose has in this case allowed me to fill the last of my five slots, which have been difficult to fill since the market declines of early August.

The entry signal on the DMI was on Monday after an earnings announcement.

The line-up:

sym slot # entry $/share sector
GLD 1 143.03 metals
SLV 2 15.88 metals
IYR 3 91.44 real estate
XLU 4 61.52 utilitiies
BIDU 5 112.22 technology

9:50 a.m. New York time

I’ve entered a shares position on XLU within my managed shares portfolio. The entry price was $61.52 per share. The entry rationale was a bull signal on Monday from the DMI indicator backed by a drop into oversold territory and then a rise back to the neutral zone on the DMI Stochastic Extreme indicator.

By Tim Bovee, Portland, Oregon, August 20, 2019

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Live: Friday, Aug. 16, 2019

12:50 p.m. New York time

IYR gave a buy signal today on the Directional Movement Indicator (DMI) today, and I have added the symbol to my managed shares portfolio for $99.44 a share. The DMI Stochastic Extreme indicator was at 29.9 at purchase, above oversold territory (10 and below) and rising.

I still have two empty slots in the portfolio in the wake of the broad market declines earlier in the week.

The line-up:

sym slot # entry $/share sector
GLD 1 143.03 metals
SLV 2 15.88 metals
IYR 3 91.44 real estate
(empty) 4
(empty) 5

By Tim Bovee, Portland, Oregon, August 16, 2019

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Live: Thursday, Aug. 15, 2019

2:45 p.m. New York time

SMH, which I rejected as a managed shares trade, has flipped back into a sell signal from the DMI, thereby providing an example of how useful the DMI Stochastic Extreme metric can be in detection potential whipsaws.

10 a.m. New York time

Only the metals among my 87 exchange-traded funds have buy signals on the Directional Movement Index (DMI). SLV is already in my managed shares portfolio, and I’ve added GLD. Not much in the way of diversification at this point, but good metrics.

SMH also had a buy signal on the DMI. However, the DMI Stochastic Extreme metric is above 90, suggesting that the symbol is overbought and poised for a fall. I’m passing on it.

The managed shares line-up:

sym slot # entry $/share sector
GLD 1 143.03 metals
SLV 2 15.88 metals
(empty) 3
(empty) 4
(empty) 5

By Tim Bovee, Portland, Oregon, August 15, 2019

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Managed Shares Trading Rules

(See the prior version of this rule set here.)

The goal of this rule set is to create a highly diversified mid-risk portfolio of exchange-traded funds, managed daily  according to crossovers in the Directional Movement Indicator (DMI) technical analysis tool that signals trend changes. A buy signal is generated when the DMI+ (uptrending) crosses above the DMI- (downtrending). A sell signal is when the DMI- crosses below the DMI+.  Investopedia gives an explanation of the DMI system, here.

Method

My holdings consist of a portfolio of five exchange-traded funds picked from a pool of funds. For signaling, I use the DMI applied to a daily chart.

I use a large pool of about 90 exchange traded funds, including U.S. general index funds, sector funds, international global and country-specific funds, and a few futures-oriented funds in metals and agriculture.

Each trading day, I do the following tasks:

Update the pool with new DMI trend readings (which are binary: Above the signal line or at or below the signal line).

  1. Compare with the final trend signal of the day.
  2. Exit any holdings whose signals have changed from buy to sell.
  3. Bring the holdings count up to five positions by selecting according to these criteria:
    1. The DMI is showing a buy signal.
    2. The most recent date that the signal for each symbol switched from sell to buy is preferred over earlier signal dates. If the number of symbols on the most recent signal date is insufficient fill out the portfolio, use the next most recent date. For any selection date where there’s a choice of symbols to use, make each selection using a random number.
    3. Each fund in the portfolio represents a unique sector compared to the others.

More briefly, the selection criteria for my five positions:

1) Buy signal. 2) Newest trend. 3) Unique sector.