10:30 a.m. New York time

Two stock positions from the Bench gave exit signals from the Zacks algorithms.

SNPS, which had been in Robotics for six days and on the Bench for five, produced a breakeven after it’s momentum strategy score dropped to C, alongside its D score for the growth strategy. My Bench rules for watchlist holdings requires an A or B score for either growth or momentum

KMTUY failed to qualify for its portfolio after a day, and three days after that was kicked off the Bench after its rank declined 4 (sell). It was also upon entry in the Robotics Portfolio. The stock fell sharply on Friday, producing a heavy loss upon exit today.

I used the funds freed up by the exits to add two positions to today’s focus portfolio, Value.

The details:

• Value
  • Entries
    • GIII, for a $27.91 debit per share.
    • SNPS, a $154.91 debit.
• Bench
  • Exits
    • KMTUY, for a $21.41 credit per share, $1.10 below the entry price, producing a 4.9% loss over four days for a -444% annual rate.
    • SNPS, for a $154.91 credit, unchanged from the entry point, producing neither a loss or a gain over 11 days.

By Tim Bovee, Portland, Oregon, February 10, 2020

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12:10 a.m. New York time

I quite carelessly failed to check out the Genetics and Robotics portfolios on my run through the tables this morning. A new entry from yesterday, KMTUY, whipsawed off of the qualifying Robotics symbols, and I’ve moved it to the Bench, with a Zacks rank of 3 (hold), a Value score of A and Growth and Momentum scores of B. I’ve made corresponding changes below.

11:55 a.m. New York time

My revised rule set for stocks, posted to the menu bar Trading Rules pulldown earlier in the week, has successfully stopped the mad churn of entries and exits that threatened to bring my system down in to pile of rubble. It’s very much like waking up to clear skies and a beautiful dawn after an overnight typhoon.

I made a slight change this morning to tighten the Bench rules up just a bit. As initially posted, the rule set required a Zacks strategy score of C or better for symbols on the Bench. I’ve changed that to a score of B or better. It triggers no change at this point, as all Benched symbols meet the higher standard.

In stock trades today, no exits and no transfers to the Bench. I entered one position in today’s focus portfolio.

Stock Trades

• Momentum Portfolio
  • Entry
    • APAM, for a $36.33 debit
• Robotics Portfolio
  • To the Bench
    • KMTUY

By Tim Bovee, Portland, Oregon, February 7, 2020

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VanEck Vectors Semiconductor ETF (SMH)

Update 3/21/2020: My short iron condor position on SMH unwound in several steps. The short puts were assigned on March 13, and in return long shares were placed in my account. I continued to hold the calls until they expired after the closing bell on Friday, March 20.

I entered the position in early February, before the crash. SMH rose to a peak on February 14, traded in a range for three days and then began a swift and relentless fall. The implied volatility rank was 73.0% at the exit, up 31.4 percentage points from the entry level.

In calculating the results I’ll do the options and the shares separately, and the calculated a combined result.

Overall, the options produced a $14.20 credit per contract/share, which added to the $1.27 credit at entry resulted in a $15.47 credit. The shares underlying the options opened exit day at $107.15 per share, down $39.90 from the entry level.

Those shares declined by 27.1% over 36 days for a -393% annual rate. The options position produced a 1108.1% return for a +11235% annual rate.

The long shares of SMH were placed in my account after assignment for a $137.00 debit per share, and I sold them for a $116.5 credit, a loss of $20.42 per share, or $14.9%, a -5,440% annual rate.

The total return, options and shares, was a loss of $4.95 per share.

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I have entered a short iron condor spread on SMH, using options that trade for the last time 43 days hence, on March 20. The premium is a $1.27 credit and the stock at the time of entry was priced at $147.00

The profit zone for this position is between $157.27 on the upside and $133.27 on the downside.

The implied volatility rank (IVR) stands at 31.4.

Premium:	$1.27	Expire OTM
SMH-iron condor	Strike	Odds	Delta
Long	159.00	88.0%	13
Break-even	157.27	84.0%	17
Short	156.00	80.0%	21
Puts
Short	137.00	77.0%	21
Break-even	133.27	81.5%	17
Long	132.00	86.0%	13

The premium is 31.8% of the width of the position’s wings.

The profit zone covers a 7.0% move to the upside and a 10.3% move to the downside of the entry price, for total coverage of 17.3%

The risk/reward ratio is 2.1:1, with maximum risk of $273 and maximum reward of $127 per contract.

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

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Consumer Staples Select Sector SPDR Fund (XLP)

Update 3/13/2020: I entered my short iron condor position on XLP prior to the Crash of 2020, and exited on March 13, a week before expiration, for a significant loss.

I exited for a $1.04 debit per contract share, a loss of $0.74, with shares trading for $54.42, down $9.95 from entry.

The markets generally began a sharp decline from their peak on February 19 at an unusually swift velocity. The implied volatility rank at exit was 91.8%, up 56.4 points from the entry level.

Shares declined by 18.3% over 36 days, or a -98% annual rate. The options position produced an 73.1% loss for a -461% annual rate.

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I have entered a short iron condor spread on XLP, using options that trade for the last time 43 days hence, on March 20. The premium is a $0.30 credit and the stock at the time of entry was priced at $64.37.

The profit zone for this position is between $66.30 on the upside and $61.30 on the downside.

The implied volatility rank (IVR) stands at 35.4%.

Premium:	$0.30	Expire OTM
XLP-iron condor	Strike	Odds	Delta
Long	67.00	88.0%	12
Break-even	66.30	81.0%	18.5
Short	66.00	74.0%	25
Puts
Short	62.00	81.0%	20
Break-even	61.30	84.5%	16.5
Long	61.00	88.0%	13

The premium is 30% of the width of the position’s wings.

The profit zone covers a 3% move to the upside and a 5% move to the downside of the entry price, for total coverage of 8%

The risk/reward ratio is 2.3:1, with maximum risk of $70 and maximum reward of $70 per contract.

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

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The Energy Select Sector SPDR ETF (XLE)

Update 3/13/2020: I entered my short iron condor position on XLE prior to the Crash of 2020, and exited on March 13, a week before expiration, for a significant loss.

I exited for a $2.19 debit per contract share, a loss of $3.54, with shares trading for $30.52, down $24.08 from entry.

The markets generally began a sharp decline from their peak on February 19 at an unusually swift velocity. The implied volatility rank at exit was 90.2%, up 36.6 points from the entry level.

Shares declined by 78.9% over 36 days, or a -237.5% annual rate. The options position produced an 82.7% loss for a -806% annual rate.

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I have entered a short iron condor spread on XLE, using options that trade for the last time 43 days hence, on March 20. The premium is a $0.42 credit and the stock at the time of entry was priced at $54.60.

The profit zone for this position is between $58.42 on the upside and $49.63 on the downside.

The implied volatility rank (IVR) stands at 53.6%.

Premium:	$0.42	Expire OTM
XLE-iron condor	Strike	Odds	Delta
Long	59.21	90.0%	11
Break-even	58.42	86.0%	15
Short	58.00	82.0%	19
Puts
Short	51.21	79.0%	20
Break-even	49.63	84.0%	15
Long	49.21	89.0%	10

The premium is 26.2% of the width of the position’s wings.

The profit zone covers a 7.0% move to the upside and a 10.0% move to the downside of the entry price, for total coverage of 17.0%

The risk/reward ratio is 2.8:1, with maximum risk of 118.60$ and maximum reward of $42.00 per contract.

By Tim Bovee, Portland, Oregon, February 5, 2020

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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

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Technology Select Sector SPDR Fund (XLK)

Update 3/21/2020: The normal course of my short iron condor position on XLK was disrupted after a short put leg of the position was assigned because it was in-the-money. The assignment put XLK long shares into my account. I sold the shares and exited the puts on March 13, and allowed the deep in-the-money calls to expire without value.

I entered the position in early February, before the crash. XLK rose to a peak on February 19, traded in a range for a day and then began a swift fall. The implied volatility rank was 79.1% at the exit, up 47.5 percentage points from the entry level.

In analyzing the results I calculated the options and the shares separately, and then combined them into a total result.

Overall, the options produced a $7.40 credit per contract/share, which added to the $1.30 credit at entry resulted in an $8.70 credit. The shares underlying the options opened exit day at $76.26 per share, down $23.40 from the entry level.

Those shares declined by 23.5% over 37 days for a -238% annual rate. The options position produced a 569.2% return for a 11235% annual rate.

The long shares of SMH were placed in my account after assignment for a $137.00 debit per share, and I sold them for a $116.5 credit, a loss of $20.42 per share, or $14.9%, a +5,615% annual rate.

The total return, options and shares, was a loss of $5.79 per share.

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I have entered a short iron condor spread on XLK, using options that trade for the last time 44 days hence, on March 20. The premium is a $1.30 credit and the stock at the time of entry was priced at $99.87.

The profit zone for this position is between $105.30 on the upside and $89.30 on the downside.

The implied volatility rank (IVR) stands at 31.6.

Premium:	$1.30	Expire OTM
XLK-iron condor	Strike	Odds	Delta
Long	107.00	92.0%	8
Break-even	105.30	84.5%	15.5
Short	104.00	77.0%	23
Puts
Short	95.00	75.0%	24
Break-even	89.30	83.0%	16
Long	88.00	91.0%	8

The premium is 26.0% of the width of the position’s wings.

The profit zone covers a 5.4% move to the upside and an 11.8% move to the downside of the entry price, for total coverage of 17.3%

The risk/reward ratio is 2.8:1, with maximum risk of $370 and maximum reward of $130 per contract.

By Tim Bovee, Portland, Oregon, February 5, 2020

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The Industrial Select Sector SPDR Fund  (XLI)

Update 3/13/2020: I entered my short iron condor position on XLI prior to the Crash of 2020, and exited on March 13, a week before expiration, for a significant loss.

I exited for a $2.04 debit per contract share, a loss of $1.60, with shares trading for $61.38, down $22.49 from entry.

The markets generally began a sharp decline from their peak on February 19 at an unusually swift velocity. The implied volatility rank at exit was 90.0%, up 57.2 points from the entry level.

Shares declined by 36.6% over 37 days, or a -228% annual rate. The options position produced an 80.1% loss for a -501% annual rate.

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I have entered a short iron condor spread on XLI, using options that trade for the last time 44 days hence, on March 20. The premium is a $0.44 credit and the stock at the time of entry was priced at $83.87.

The profit zone for this position is between $87.44 on the upside and $78.44 on the downside.

The implied volatility rank (IVR) stands at 32.8%.

Premium:	$0.44	Expire OTM
XLI-iron condor	Strike	Odds	Delta
Long	88.00	86.0%	15
Break-even	87.44	82.0%	18.5
Short	87.00	78.0%	22
Puts
Short	80.00	77.0%	22
Break-even	78.44	81.0%	18
Long	78.00	85.0%	14

The premium is 29.3% of the width of the position’s wings.

The profit zone covers a 4.3% move to the upside and a 6.9% move to the downside of the entry price, for total coverage of 11.2%

The risk/reward ratio is 2.4:1, with maximum risk of $106 and maximum reward of $44 per contract.

By Tim Bovee, Portland, Oregon, February 5, 2020

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Materials Select Sector SPDR Fund (XLB)

Update 3/13/2020: I entered my short iron condor position on XLB prior to the Crash of 2020, and exited on March 13, a week before expiration, for a significant loss.

I exited for a $2.22 debit per contract share, a loss of $1.79, with shares trading for $45.24, down $15.60 from entry.

The markets generally began a sharp decline from their peak on February 19 at an unusually swift velocity. The implied volatility rank at exit was 90.2%, up 51.6 points from the entry level.

Shares declined by 34.4% over 37 days, or a -158% annual rate. The options position produced an 82.1% loss for a -570.4% annual rate.

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I have entered a short iron condor spread on XLB, using options that trade for the last time 44 days hence, on March 20. The premium is a $0.43 credit and the stock at the time of entry was priced at $60.84.

The profit zone for this position is between $63.43 on the upside and $56.43 on the downside.

The implied volatility rank (IVR) stands at 45.4%.

Premium:	$0.43	Expire OTM
XLB-iron condor	Strike	Odds	Delta
Long	64.00	78.0%	12
Break-even	63.43	83.0%	17
Short	63.00	88%	22
Puts
Short	58.00	85.0%	24
Break-even	56.43	80.0%	19
Long	56.00	75.0%	14

The premium is 28.7% of the width of the position’s wings.

The profit zone covers a 4.3% move to the upside and a 7.8% move to the downside of the entry price, for total coverage of 12.1%

The risk/reward ratio is 2.5:1, with maximum risk of $107 and maximum reward of $43 per contract.

By Tim Bovee, Portland, Oregon, February 5, 2020

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SPDR S&P Biotech exchange traded fund (XBI)

Update 3/4/2020: My short iron condor position on XBI became minimally profitable 16 days before expiration, and I exited the position. The debit was $1.55 per contract share, down $0.05 from the entry debit, with shares trading for $91.68, which is $4.50 below their price at entry.

XBI was one of my holdings caught in the Coronavirus Crash that began February 19. The price of the underlying stock, along with most of the market, gapped to the downside on February 24 and kept on going, reaching turning point on February 28 and recovering about half of its loss. The put strike price for the position was $89. XBI moved above that on March 2.

The implied volatility rank rose by 25.4 points above its entry level, to 58.8%, as is to be expected in a rapidly declining market.

Shares showed a net decline of 4.9% over 28 days. The options position produced a 0.7% return for a 42% annual rate.

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I have entered a short iron condor spread on XBI, using options that trade for the last time 44 days hence, on March 20. The premium is a $1.60 credit and the stock at the time of entry was priced at $96.18.

The profit zone for this position is between $105.60 on the upside and $82.60 on the downside.

The implied volatility rank (IVR) stands at 33.4%.

Premium:	$1.60	Expire OTM
XBI-iron condor	Strike	Odds	Delta
Long	110.00	96.0%	5
Break-even	105.60	89.0%	13
Short	104.00	82.0%	21
Puts
Short	89.00	78.0%	20
Break-even	82.60	86.0%	12.5
Long	81.00	94.0%	5

The premium is 22.9% of the width of the position’s wings.

The profit zone covers a 9.8% move to the upside and a 16.4% move to the downside of the entry price, for total coverage of 26.2%

The risk/reward ratio is 3.4:1, with maximum risk of $540 and maximum reward of $160 per contract.

By Tim Bovee, Portland, Oregon, February 5, 2020

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