Live: Tuesday, February 25, 2020

3:25 p.m. New York time

And as the closing bell approaches, my short iron condor position on SMH drops into unprofitability. Here’s a quick-and-dirty table showing my short iron condors and how far below the short put strike prices they are. As a percentage, nothing too terrifying.

QQQ 216.71 215 0.8% 1.71
SMH 135.66 137 -1.0% -1.34 x
XBI 91.62 89 2.9% 2.62
XLB 56.365 58 -2.8% -1.635 x
XLE 49.375 51.21 -3.6% -1.835 x
XLI 78.2819 80 -2.1% -1.7181 x
XLK 92.89 95 -2.2% -2.11 x
XLP 62.165 62 0.3% 0.165
XLV 97.425 99 -1.6% -1.575 x

2:20 p.m. New York time

The stock position GH in my Genetics Portfolio has triggered its trailing 20% stop/loss, exiting for a $71.64 credit per share, down $4.50 from the entry debit. The position produced a 5.9% loss over 22 days for a -98% annual rate.

12:10 p.m. New York time

Of my nine short iron condor options positions, five have moved below the strike price of the short puts that make up the iron condor strategy. They cover a wide variety of sectors: XLB for for materials, XLE for energy, XLI industry, XLK technology and XLV for health care.

The positions with all legs remaining out of the money — the good spot — are QQQ for the NADSAQ, SMH for semi-conductors, XBI for biotech and XLP for consumer staples.

10:45 a.m. New York time

Yesterday’s dive in the markets — the headlines said it plunged, but honestly, having watched the value of my mutual funds evaporate during the Crash of ’87, when the market lost 25% in one day, this little 3%+ stubbed toe doesn’t seem too terribly impressive by comparison.

I lost two positions to my standard trailing 20% stop/loss, which is a fairly robust performance in a portfolio that had 28 positions.

My short iron condor positions made it through Monday with all options out of the money — the good place. However, this morning my XLE position saw the price move beyond it’s short put strike price of $51.21, to $50.79 at the time I’m writing. Friday is 21 days before expiration, when I manage options positions, and for the moment I’ll keep close watch on XLE but take no action.

I follow three big-picture metrics that give me guidance on when to pull out of the markets.

  • One is the 200-day moving average on SPY, the exchange-traded fund that tracks the S&P 500. The closing price on Monday stood at 3.1% above the simple moving average, compared to 9.85 above at Friday’s close. The action point is a persistent close below the moving average.
  • Another metric, more economics oriented, is the Sahm Rule, a Federal Reserve metric that can be used to gain early warning of when the economy has moved into a recession. The Fed’s alarm signal is when the Sahm moves above 50. My alarm signal is when the metric moves about 20. It presently stands at zero for the second month in a row and will next be updated on Friday next week, March 6.
  • A third metric — more of an experiment, really — is the average Zacks rank of the stocks in the Dow Jones Industrial Average — the DJ30. A rank of one is the best and five is the worst. It has been steady at a rank of 2.8. Anything lower than 3 is a “buy” signal. I have no specific action point on this metric, but if it moves above 3 then I’ll start to worry, and the higher it goes, the more likely I’ll be to act, most likely making the decision in conjunction with the trend of the most sensitive of the three metrics, the moving average.

And so, today, with the market looking a bit dazed.

My focus portfolios are Growth and Genetics. I plan no new entries in either. In honor of yesterday’s declines, I’ve added a new requirement, that the Fisher Transform (FT) metric be in uptrend mode. I’ve used the FT for quite some time in an options context. An explanation of the FT may found here.

None of the Genetics Portfolio prospects met that requirement. One of the Growth Portfolio prospects — UTHR — has an uptrending signal, with earnings to be released on Wednesday before the opening bell. The Zacks Earnings Surprise Predictor is negative, and so I’m staying away from it.

Bottom line: I plan no stock entries today.

I took profits on CYH, exiting after it made a huge rise after earnings were announced. The Street estimate was a 47-cent loss. The actual net income was a 40-cent gain. I figured the only reasonable next move was a decline.

I exited CYH for a $6.11 credit, up $1.60 from the entry debit. The position produced a 35.5% gain over 29 days for a +447% annual rate.

Also, I made one transfer to the Bench, as RL’s Zacks rank dropped from “strong buy” (1) to “buy” (2), removing it from the SP500 Portfolio. It can remain on the Bench with a rank 3 (“hold”), as long as either the growth or momentum metrics show an A or B. A drop to the “hold” rank (3) or both the growth and momentum metrics moving at worse than B would trigger a sale.

Finally, SNX, which had been benched, regained its place in the Growth Portfolio.

By Tim Bovee, Portland, Oregon, February 25, 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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