Live: Thursday, February 6, 2020

12:50 p.m. New York time

OK. I’m done. I’m passing on both TLT and EEM, for the same reason: The economic impact of the Wuhan corona virus. The geopolitical analysis people at Stratfor say that we won’t know until mid-February or so just what magnitude of event we’re undergoing: Maybe a blip brought quickly under control, maybe a global pandemic with a low death rate, maybe a spike with a high death rate. We’ll know in time for the April options, but not the March series.

EEM is essentially China, and TLT is essentially the world’s assessment of the U.S. economy, and so both are intimately tied to the impact of Wuhan. No trade for those two, not now, at least.

12:50 p.m. New York time

I’ve entered a short iron condor position on SMH.

12:30 p.m. New York time

I’ve entered a short iron condor position XLP. Not an entirely comfortable trade. It gives good 30% coverage to the wings width. The difficulty is the structure of the trading grid. I normally set my short legs at around 20 delta and the long wings at around 12 delta. For the calls on XLP, the best I can do for the short leg is 20 delta, and the next strike down is 11 delta, which leaves me less than $3 out of the money for the long leg. At any rate, as Uncle Julius used to say, “The die is cast.”

12:05 p.m. New York time

I’ve entered a short iron condor position on XLE.

10:10 a.m. New York time

In stocks, I added two positions to today’s focus portfolio, Robotics, and transferred one position to the Bench.

  • Robotics Portfolio
    • Entries
      • KMTUY, for a debit of $22.51.
      • TER, a $71.15 debit.
  • Value Portfolio
    • Benched
      • MOD, after its Zacks rank dropped from strong buy (1) to buy (2).

In options, by my rules this is the last day to enter new positions using contracts that expire on March 20.

Yesterday I entered short iron condor positions on QQQ, XBI, XLB, XLI, XLK and XLV. I passed on XLP, XLU and XLE because the positions I built has insufficient potential profit to provide a reasonable risk.

I shall look at them again, especially XLE, because I presently have no exposure to energy in my March plays. Also lacking is exposure to the financial sector, whose exchange-traded fund, XLF, has an implied volatility rank below 30%, which is too low for my taste. Also, I have no exposure to gold, whose volatility is low.

Other possibilities with sufficiently high volatility: SMH (semiconductors), EEM (emerging markets, which is one third China and one half East Asia), and TLT (long-term U.S. bonds).

I’m passing on EEM because of uncertainty surrounding the Wuhan coronavirus. Basically, we don’t yet know what we’re facing.

I’ve traded TLT options four times and only once, last September, did it turn out to be a losing trade. So I’ll add that to my check-it-out list,

The Maybe List: XLP, XLU, XLE, SMH, TLT.

A fun day ahead.

By Tim Bovee, Portland, Oregon, February 6, 2020


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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