Live: Friday, February 28, 2020

11:20 a.m. New York time

I’ve posted a brief discussion of the long-term chart. I mean, really long term: The Dow Jones Industrial Average from 1906 until today. It’s titled, “Just to put things in perspective…

10:10 a.m. New York time

In stocks, one of my AAPL lots, the one with the highest entry price, triggered its stop/loss and was sold. AAPL is in the  Genetics, Robotics and S&P 500 portfolios. Two lots remain.

The AAPL sale provided a $258.78 credit per share, down $59.22 from the entry price, an 18.6% loss over 10 days for a -680% annual rate.

Also triggered, the stop/loss on another S&P 500 stock, QRVO, for a $92.52 credit per share, down $17.74 from entry, producing a 16.1% loss over 15 days for a -391% annual rate.

Remaining stock positions:  AAPL and TSM.

9:55 a.m. New York time

Today is management day for my short iron condor options positions expiring after the closing bell on March 20. It’s the day that I exit my profitable positions, only retaining the losing positions in the hope that they’ll return to profitability in the 21 days until expiration.

Actually, it’s going to be a very easy management day, for none of my nine short iron condor positions is profitable at present. Indeed, all contain options that are trading in the money. For a short options position, in the money means the position will be unprofitable when it expires, and indeed almost always will be exchanged for short shares of stock, a minor pain in the neck when it happens.

Here’s table showing how far in the money my positions are this morning. As an analytical tool, I’ve taken the 14-day average true range (ATR) — a measure of how far a stock can be expected to fluctuate in a day — and divided it by the distance the price is in the money, showing how many days of normal trading it would take to return to profitability.

QQQ 202.04 215 -6.0% (12.96) x 4.15 -3.1
SMH 126.83 137 -7.4% (10.18) x 3.71 -2.7
XBI 88.45 89 -0.6% (0.55) x 2.29 -0.2
XLB 52.36 58 -9.7% (5.64) x 1.01 -5.6
XLE 44.56 51.21 -13.0% (6.65) x 1.26 -5.3
XLI 73.16 80 -8.6% (6.84) x 1.36 -5.0
XLK 85.94 95 -9.5% (9.06) x 2.08 -4.4
XLP 57.73 62 -6.9% (4.27) x 0.76 -5.6
XLV 92.44 99 -6.6% (6.56) x 1.53 -4.3

By that measure, XBI is in the best shape, only 0.2 of its ATR day way from the profit point. The worst is XLB, which is 5.6 ATR days away from profitability.

There’s no way to salvage these positions by selling off losing options. A short spread strategy limits the potential loss, and implicitly when I set up the position, I knew what I could afford to lose. So I’ll hang on to the positions and take my profits if any do indeed return to profitability, or take my losses if they don’t.

By Tim Bovee, Portland, Oregon, February 28, 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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