The Health Care Select Sector SPR Fund (XLV)

Update 1/31/2020: I’ve exited my short iron condor position on XLV, with 21 days left until the options expire. I got out for a debit of $0.59 per contract share, a profit of $0.08, with the stock trading at $99.29, down $2.25 from the entry level. My exit was at 11.9% of maximum potential profit.

XLV peaked 11 days after I entered the position and the began a sharp decline that was in its 7th day when I closed the position. Implied volatility did the opposite of what short option traders hope for, rising (rather than falling) by 33.65 points to 65.9%.

Shares showed a net decline of 2.2% over 24 days, or a -34% annual rate. The options position produced a 13.6% return for a +206% annual rate.

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I have entered a short iron condor spread on XLV, using options that trade for the last time 45 days hence, on February 21. The premium is a $0.67 credit and the stock at the time of entry was priced at $101.54

The profit zone for this position is between $105.67 on the upside and $95.00 on the downside.

The implied volatility rank (IVR) stands at 32.3%.

Premium:	$0.67	Expire OTM
XLV-iron condor	Strike	Odds	Delta
Long	106.33	87.0%	13
Break-even	105.67	82.0%	17.5
Short	105.00	77.0%	22
Puts
Short	97.33	77.0%	23
Break-even	95.00	82.0%	18
Long	94.33	87.0%	13

The premium is 30.9% of the width of the position’s wings.

The profit zone covers a 4.1% move to the upside and a 6.9% move to the downside of the entry price, for total coverage of 11.0%

The risk/reward ratio is 2.2:1, with maximum risk of $149 and maximum reward of $67 per contract.

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

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iShares 20+ Year Treasury Bond ETF (TLT)

Update 2/22/2020: I my short iron condor position on TLT, three days before the options expire. The debit was $2.18, a loss of $2.80 per contract/share. The unraveled the position in two steps, selling the in-the-money short call spreads on February 19, and then allowing the short put spreads to expire worthless after the Friday’s closing bell. Shares were trading at $145.45 at exit, $7.37 above their level at entry.

The underlying stock began to climb two days after I entered the options position, largely staying, unprofitably, above the short call strike price for the remaining time I held the position. The implied volatility rank was 40.5% at exit, 8.8 points above the entry level.

The options position produced a -64.2% loss over 43 days for a -545% annual rate.

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I have entered a short iron condor spread on TLT, using options that trade for the last time 45 days hence, on February 21. The premium is a $0.78 credit and the stock at the time of entry was priced at $138.08.

The profit zone for this position is between $143.78 on the upside and $131.78 on the downside.

The implied volatility rank (IVR) stands at 36.7%.

Premium:	$0.78	Expire OTM
TLT-iron condor	Strike	Odds	Delta
Long	146.00	89.0%	11
Break-even	143.78	83.5%	16
Short	143.00	78.0%	21
Puts
Short	134.00	79.0%	23
Break-even	131.78	84.5%	16.5
Long	131.00	90.0%	10

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

The profit zone covers a 4.1% move to the upside and a 4.9% move to the downside of the entry price, for total coverage of 8.9%

The risk/reward ratio is 2.8:1, with maximum risk of $222 and maximum reward of $78 per contract.

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

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SPDR Gold Shares (GLD)

Update 1/22/2020: GLD reached its management goal — half of maximum potential profit (49.5%) — and I exited for a $0.49 debit per share, leaving $48 profit for each 100-share contract. The stock was priced at $146.50 at exit, down $1.30 from the entry level.

GLD fell slightly on the third day of the position, and then traced a sideways pattern within a narrow range. The implied volatility rank fell during the hold period by 27.1 points, to 18.8%

Shares declined by 0.9% over 15 days, or a -21% annual rate. The options position rose by 98.0% for a +2,384% annual rate.

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I have entered a short iron condor spread on GLD, using options that trade for the last time 45 days hence, on February 21. The premium is a $0.97 credit and the stock at the time of entry was priced at $147.80.

The profit zone for this position is between $154.97 on the upside and $142.97 on the downside.

The implied volatility rank (IVR) stands at 45.9%.

Premium:	$0.97	Expire OTM
GLD-iron condor	Strike	Odds	Delta
Long	159.00	89.0%	12
Break-even	154.97	83.0%	18
Short	154.00	77.0%	24
Puts
Short	144.00	78.0%	24
Break-even	142.97	82.5%	19
Long	142.00	87.0%	14

The premium is 27.7% of the width of the position’s wings.

The profit zone covers a 4.9% move to the upside and a 3.4% move to the downside of the entry price, for total coverage of 8.2%

The risk/reward ratio is 2.6:1, with maximum risk of $253 and maximum reward of $97 per contract.

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

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The Consumer Discretionary Select Sector SPDR Fund (XLY)

Update 1/31/2020: I exited my short iron condor on XLY today, 21 days before expiration, for a $0.79 debit, a profit of $0.08 per contract share, at 9.2% of maximum potential profit. Shares were trading at $126.36, having risen $0.43 above the entry level.

XLY maintained a rising trend for 10 days after entry, and on the 11th day began a sharp decline that has lasted into the 7th day, when I exited. Implied volatility stood at 34.0% at exit, down 16.7 points from the entry level.

Shares rose by a net 0.3% over 24 days, or a +5% annual rate. The options position produced a 10.1% return for a +154% annual rate.

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I have entered a short iron condor spread on XLY, using options that trade for the last time 45 days hence, on February 21. The premium is a $0.87 credit and the stock at the time of entry was priced at $125.93.

The profit zone for this position is between $130.87 on the upside and $117.87 on the downside.

The implied volatility rank (IVR) stands at 50.7%.

Premium:	$0.87	Expire OTM
XLY-iron condor	Strike	Odds	Delta
Long	132.00	87.0%	12
Break-even	130.87	81.5%	17.5
Short	130.00	76.0%	23
Puts
Short	121.00	77.0%	23
Break-even	117.87	82.5%	17.5
Long	117.00	88.0%	12

The premium is 29.0% of the width of the position’s wings.

The profit zone covers a 3.9% move to the upside and a 6.8% move to the downside of the entry price, for total coverage of 10.8%

The risk/reward ratio is 2.4:1, with maximum risk of $213 and maximum reward of $87 per contract.

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

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2 p.m. New York time

I’ve updated the list of shares trades at the bottom of this post with results analysis for the positions I exited.

1:40 p.m. New York time

I’ve entered a short iron condor position on EEM. That completes my entry into options positions using puts and calls that expire on February 21. Next step is to update the stock trades I posted this morning with the results analysis for positions I exited.

1:25 p.m. New York time

FXE is a pass. Given the prices and strikes on the grid, the best I can do is a premium that is 20% of the average width of the iron condor’s wings. That’ not enough potential win to make up for the risk.

1:20 p.m. New York time

The XLI trade wraps up the 30%+ IVR prospects. Some of the positions I entered earlier have already seen a rope implied volatility, a good thing for a short iron condor position. I have two possibilities in the IVRU 25% to 29% range: FXE and EEM. The FXE fund tracks the Euro, and EEM is foreign markets. I’ll analyze both, and then that will be a wrap for the options.

1:15 p.m. New York time

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

12:05 p.m. New York time

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

That wraps up my prospects with an implied volatility rank of 30% or greater. After a breakfast break, I’ll see what’s attractive down to an IVR of 25%.

11:50  a.m. New York time

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

The next down on the implied volatility rank list is USO, which is oil. I’m going to pass, given the uncertainties in the Middle East.

11:35 a.m. New York time

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

11:20 a.m. New York time

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

11:05 a.m. New York time

I’ve entered a short iron condor position on XLY, expiring in February.

10:40 a.m. New York time

This is entry day in my options cycle, the day I open short iron condor positions using options that expire on February 21. The routine of the cycle goes like this: Enter 45 days before expiration, sell at 50% of maximum potential profit, sell the remaining profitable positions 21 days prior to expiration (January 21), and hang on to the unprofitable positions until the turn profitable or until the are close to expiration.

The entry is complicated by one remaining unprofitable position built from the XLY options that expire  January 17. It is within the profit zone, but is not yet profit, and so I am hanging on to it, although it soaks up cash that might be used profitably for February expirations.

In stocks, the Zacks algorithm wiped out all but one of my Momentum holdings, although three found spots on the Bench because of their “strong buy” rating and one was added to the Growth Portfolio, which also saw three more additions.

Given the magnitude of the changes, I’ve tightened the Bench rules to allow only stocks with a #1 ranking from Zacks in order to free funds for the additions.

In the Genetics Portfolio, one is out, two  are in.

The trades and transfers (I’ll add results analysis of the exits later today):

• Growth
  • Exits
    • NSIT for a $71.51 credit, up $0.06 from the entry price, producing a 14.5% return over 61 days for a +87% annual rate.
    • TX, a $21.44 credit, down 79 cents from entry. The exit resulted in a -3.6% loss over one days, or a -1,297% annual rate.
  • Entries
    • AMED for a $167.48 debit
    • LHCG, a $137.50 debit
    • MKSI, a $106.99 debit
  • Transfers in
    • FORM, from the Momentum Portfolio
• Momentum
  • Exits
    • ACA for a $45.37 credit, up 4 cents from the entry price, resulting in a +0.1% return over one day for a +32% annual rate.
    • MBT, a $10.38 credit, up 2 cents from entry producing a 0.2% return over one day for a +70% annual rate.
  • Entries
    • ENPH, a $28.83 debit
    • ESTE, a $7.03 debit
    • HELE, a $182.18 debit
    • PFGC, a $52.10 debit
    • SYNA, a $69.55 debit
    • TALO, a $30.99 debit
  • Transfers in
    • CNXM duplicates a Growth Portfolio holding.
  • Transfers out
    • FORM, to the Growth Portfolio
    • DQ, JD and NGLOY to the Bench
• Genetics
  • Exit
    • GH for a $78.80 credit, down $3.86 from the entry price. The decline was a $4.7% loss over 18 days, or a -95% annual rate.
  • Entries
    • CLLS for a $16.74 debit
    • INO, a $3.12 debit
• Bench
  • Exits
    • OESX for a $3.37 credit, a 12-cent gain over the entry price, showing a $3.7% return over 12 days for a +112% annual rate.
    • BMY, a $63.28 credit, which is 46 cents below what I paid at entry, resulting in a -.7% loss over 21 days, or a -13% annual rate.
    • LPLA, a $93.59 credit, up 82 cents from entry, producing a 0.9% return over four das for a +81% annual rate.
  • Transfers in
    • BYD, STM from Growth; DQ, JD, NGLOY from Momentum

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

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10:25 a.m. New York time

Options

My primary concern continues to be my short iron condor options position on XLY. It expires at the end of next week, it’s underlying stock price remains in the profit zone, and yet the positions remains unprofitable.

On Tuesday of this week — tomorrow — I enter new options positions using the series that expires February 21, which will be 45 days away. Earlier I posted about the shortage of exchange-traded funds with sufficient volatility to meet my standards for an options trade. Happily for my strategy, the situation has reversed, and I have ETFs in 10 different sectors that meet my standards: An implied volatility rank of 25% or higher.

I discussed  in an earlier post the possibility of using calendar spreads as a vehicle for trading low-volatility options positions. It’s the less desirable options compared to short iron condors, so now that my choices are greater, I shall slide calendar spreads back on  the shelf until the next low-vol period hits.

Stocks

In stocks, I have no exits planned today. Three stocks fell short of the metrics needed to remain in their portfolios: LPLA in the Growth Portfolio and PAAS in Momentum, both of them strategy portfolios, and BMY from Genetics, a watchlist portfolio. The strategy-based holdings were removed because of their metrics; the watchlist holdings was removed by managers of the ETF whose holdings list I’m using for my pool, ARKG.

All three continue to carry attractive ranks from Zacks, so I have moved them to the Bench, a portfolio for, among other uses, stocks that have been dropped from a portfolio that still have a buy (2) or strong buy (1) rank.

Three stocks joined the qualifying symbols in the Growth Portfolio: BYD, STM and TX.

I also added four positions to the Momentum Portfolio as I continue to move toward the goal of holding every stock in its population, which presently numbers 12. These trades put me more than halfway there, with five more to go. (The population changes every day, of course, so the goal is always in flux.)

The entries:

• Growth
  • BYD for a $29.27 debit.
  • STM, a $26.73 debit.
  • TX, a $22.23 debit.
• Momentum
  • ACA for a $45.33 debit.
  • FORM, a $26.09 debit.
  • JD, a $37.81 debit.
  • MBT, a $10.36 debit.

Over the weekend I implemented my decision to narrow the floating stop loss on all stock positions to 10%, improving the risk/reward ratio.

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

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3:35 p.m. New York time

In light of the global economic uncertainties after recent events in the Middle East, I plan to reduce my my stop/losses to a trailing 10% over the weekend. Presently, they’re at a trailing 20%.

Here’s the portfolio inventory to end the week:

Options: XLY (a short iron condor)

Stocks:

• Growth: ATSG, CNXM, HII, LAWS, LPLA, NSIT, RH and TLYS.
• Momentum: DQ, NGLOY, PAAS and VIPS.
• Genetics: AAPL, AQB, BMY, CGEN, GH and PSTI.
• Income: HYG.
• Bench: JNCE and OESX.

1 p.m. New York time

My short iron condor options position on XLY continues to be unprofitable, trading now at $0.90, well above my minimally profitable target of $0.44. Even so, the price remains within the profit zone, and so the odds are in favor of a profitable outcome. The position ends on January 17, and I shall continue to hold until next week

In stocks, the raging torrent of analyst reassessments continued, triggering three exits from the Growth Portfolio and two from the Genetics Portfolio.

Not all changes were negative. The algorithm added five new prospects to the Growth Portfolio.

I also added three symbols to the Momentum Portfolio. Yesterday’s exit from DX late in the session freed sufficient cash for me to fully build out the Momentum Portfolio, promoting from secondary status to a primary portfolio, on a par with Growth. For that purpose, I tightened the criteria for inclusion, the theory being that momentum varies far more quickly than value or growth, and so should have strict entrance requirements.

The good news is that there are only 14 positions in the reworked Momentum Portfolio, The bad news is that only one of my current momentum holdings, PAAS, still qualifies under the tighter rules. The other two, JNCE and OESX, continue to have strong buy rank from Zacks, so I’ll move them into the Bench Portfolio and continue to hold them until they drop down to a neutral rank.

This adds a second fully realized strategy to the mix, providing greater diversification of my holdings, always a good thing in my book.

The trades:

• Exits
  • Growth Portfolio
    • AOSL for a $13.61 credit, up 2 cents from the entry price. The position returned 0.2% over three days for an 18% annual rate.
    • BLDR for a $25.31 credit, down 10 cents from the entry price, producing a 0.4% loss over one day, a -144% annual rate.
    • IBP for a $69.36 credit, down $2.14 from entry, showing a -3.0% loss over 22 days for a -50% annual rate.
  • Genetics Portfolio
    • CLLS for a $17.53 credit, down 86 cents from the entry price, producing a -4.7% loss over eight days, or a -14% annual rate.
    • CSTL for a $34.26 credit, up $7.20 from entry for a +26.6% return over 16 days, a 607% annual rate.
• Entries:
  • Growth Portfolio
    • ATSG for a $23.17 debit
    • CNXM, a $17.79 debit
    • HII, a $258.94 debit
    • LAWS, a $52.53 debit
    • LPLA, a $92.77 debit
  • Momentum Portfolio
    • DQ for a $54.71 debit
    • NGLOY, a $14.44 debit
    • VIPS, a $14.99 debit

That’s the lot. A busy morning, and fine example of the new capabilities that come from no-commission trading. I did in a couple of hours what an exchange-traded fund or mutual fund might take days to accomplish. Their business models force them to think big, and that lengthens their response time. With no commission, I can respond quickly to the changing situation, keeping my positions manageably small so no one company’s ill fortune can cost me a significant portion of my trading funds. Thinking of it that way, it was a very good morning indeed.

By Tim Bovee, Portland, Oregon, January 3, 2020

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4:10 p.m. New York time

I exited DX for $16.88 credit, up $1.05 from the entry price. With 30 cents a share in dividends added in, the position produced a  6.5% return over 57 days for a +41% annual rate.

3:45 p.m. New York time

One of my Income Portfolio holdings, DX, has been downgraded to hold, and I’ve exited. Results shortly.

10:50 a.m. New York time

And once again a string of exits, two from my primary portfolio, Growth; one from a secondary portfolio, Momentum; and one from a watchlist portfolio, Genetics.

That follows five portfolio exits on December 31, two of them from Growth; one on December 30, from Growth; one on December 27, from Momentum; and three on December 26, two of them from Growth. That follows a period when exits from the Growth portfolio, while not rare, weren’t daily occurrences and didn’t come in batches. So what gives?

The Growth Portfolio differs from the other two strategy portfolios in that it is forward looking. It is based on analyst assessments of future prospects for earnings growth, the engine that drives stock prices. Momentum, in contrast, looks to the past — if the trend has been up in several different time frames the it qualifies for the portfolio. Value is wishful thinking — a stock is cheap now compared to earnings, maybe it will recover.

My hypotheses is that we’re getting a string revised assessments from analysts. It’s the start of the year, and that’s when such things happen. The next earnings season kicks off January 15, when AA publishes 4th quarter results, and it is in the run-up to earnings that new analytical reports are most useful.

Today’s trades in stocks.

• Exits
  • Growth Portfolio
    • CRAI for a $53.94 credit, up $3.13 from entry. I received 23 cents in dividend payouts. Altogether, the position produced a 6.1% return over 43 days for a +52% annual rate.
    • HA for a $29.73 debit, down 93 cents from entry, resulting in a 3.0% loss over nine days, or a -123% annual rate.
  • Momentum Portfolio
    • IRWD for a $13.33 credit, down 12 cents from entry, showing a 0.9% loss over three days for a -109% annual rate.
  • Genetics Portfolio
    • EDIT for a $29.17 credit, down 53 cents from entry, producing a 1.85 loss over two days, or a -326% annual rate.
• Entry
  • Growth Portfolio
    • BLDR for a $25.41 debit.

By Tim Bovee, Portland, Oregon, January 2, 2020

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12:10 p.m. New York time

A busy morning in my stock portfolios, with six exits and three entries. To me it suggests that the markets are churning at a top, leading to a downward correction, big or small.

Today’s trades:

• Exits
  • Value Portfolio: PWR for a $40.82 credit, up 45 cents per share from entry, showing a 1.1% return over 22 days for a +19% annual rate.
  • Growth Portfolio
    • DCO for a $50.25 credit, up $1.77, producing a 3.7% return over 39 days for a 34% annual rate
    • MOMO for a $33.84% credit, down 3.51 from entry, a 9.4% loss over 29 das for a -118% annual rate.
  • Momentum Portfolio: CROX for a $41.92 credit, up 69 cents, showing a 1.7% return over four days for a 154% annual rate
  • Genetics Portfolio:
    • INCY for a $35.05 credit, down $4.51, producing a 4.9% loss over 14 days for a -128% annual rate.
    • NTLA for a $14.65 credit, down 57 cents, resulting in a 3.8% loss over 12 days for a -114% annual rate.
• Entries
  • Growth Portfolio: AOSL, a $13.59 debit.
  • Genetics Portfolio:
    • AAPL, a $291.90 debit.
    • EDIT, a $29.70 debit.

So three losses, three wins on the exits.

By Tim Bovee, Portland, Oregon, December 31, 2019

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11:45 a.m. New York time

I’ve entered a position on IRWD in the Momentum Portfolio, for a $13.45 per share debit.

11:15 a.m. New York time

SSD dropped off of the Growth Portfolio screen, and I exited for an $80.30 credit, a loss of $3.10 per share. The position produced a 3.7% loss over 59 days, or a -23% annual rate. It peaked six days after entry and swung into a slow decline.

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

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