Live: Saturday, March 21, 2020

5:05 p.m. New York time

Three of my option positions, the remnants of short iron condor positions assigned or exited on March 13, expired Friday, March 20, without value. The expirations complete my MAR series of options positions, entered in early February before the crash. I’ve updated the entry analyses with results.

The positions were written on QQQ, SMH and XLK.

By Tim Bovee, Portland, Oregon, March 21, 2020

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Live: Friday, March 20, 2020

3:05 p.m. New York time

I have updated with results the analyses of my three bear call options spreads positions on SPY. They are:

I shall enter new SPY positions on Monday.

12:40 p.m. New York time

As it turns out, all three of my SPY short bear call spread positions exceeded half of maximum potential profit, which is my signal to exit. Which I did, and I shortly I shall update with results the analyses for SPY lots 9, 10 and 11. I entered lot 9 on March 16, and lots 10 and 11 yesterday, once again illustrating the velocity of market sentiment in these times.

12:25 p.m. New York time

On the S&P 500 chart, by my count the 3rd Elliott wave of the Minor degree in the decline that began March 3 continues its downward course.

I’d like to step back for a bit of orientation. In this discussion, I refer to three wave degrees, all following the same rules but nested one within the other, like Russian Matryoshka dolls.

R.N. Elliott, in his 1938 book The Wave Principlenamed nine degrees of wave. From the largest to the smallest, they are Grand Super Cycle, Super Cycle, Cycle, Primary, Intermediate, Minor, Minute and Minuette.

February 19, when the crash began marked the peak of the Intermediate 5th wave within a peaking Primary wave, and the decline that followed was Intermediate 1st wave of new Primary 1st wave to the downside.

In trading this bear market my primary interest is the Minor degree, with the Intermediate degrees proving a larger trend model and the Minute degree helping me understand where we are in the current Minor wave.

Internally, the S&P 500 is perhaps finishing up a Minute degree 4th wave correction upward, and after that it will continue with a 5th Minor wave to complete the Intermediate degree 1st wave of the decline from February 19, the day the crash began.

So far the Minor 3rd, at 15.9%, is shorter than the 1st, at 20.3%. It’s not a hard and fast rule, but the 3rd wave tends to be the longest of the three waves moving in the direction of the trend — impulse waves — so the assumption that the Minor 3rd wave will exceed 20.3% is a higher probability than that it will stop short of that level.

That gives us a probability that the Minor 3rd wave will at the least reach the 2280 level on the S&P 500, and there are no brakes there to halt the fall.

So, to current business.

My remaining MAR series options expire today. They are a sad remnant of the short iron condor positions I had entered in early February, before the crash. Earlier I exited the some of loss-making in-the-money wings of the iron condors, exited some entirely, and had two exercised, as described in my “Live” post of March 13.

In retrospect, which always provides the clearest view, I ought to have exited immediately after it became clear that we were in a crash, which was the S&P 500’s opening gap to the downside on February 24. In the future, during this bear market, I shall take it as a firm exit signal when a position moves above the strike price of its short call.

The three remaining positions, all truncated to short bear call spreads, have no value — which means a 100% profit for short positions — and I expect them to expire after the closing bell. There is a some theoretical chance of exercise, but I’ve not seen that yet on worthless options.

Over the weekend I shall update with results the analyses of the full iron condors — the losses taken March 13 and the full-profit expirations of today.

Otherwise, I’m fully invested in short bear call spreads on SPY, which tracks the S&P 500, with funds also invested in long shares of SDS, which does the inverse of SPY and doubles the movements. No trades in sight today.

By Tim Bovee, Portland, Oregon, March 20, 2020

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SPY Analysis (lot 11)

SPDR S&P 500 ETF Trust (SPY)

Update 3/20/2020One day after I entered the SPY, lot 10, short bear call spread, the S&P 500 declined, and I exited the position. The debit at exit was $0.55 per contract share, a $0.87 profit that is 61.3% of maximum potential profit, as shares traded for $235.11 per share, down $1.50 from the entry price.

During the  lifespan of the trade the S&P 500 was executing an upward correction and a downward reverse, all at a small scale. The implied volatility rank was 65.8% at exit, down 29.2% from the entry level. The profit from the trade came largely from the rapidly declining implied volatility, along with the usual supply and demand impacts.

Shares declined by 0.6% over one day, or a -0.4% annual rate. The options position produced a 156.41% return for a +57,736% annual rate.


I have entered a short bear call spread on SPY, lot 11, using options that trade for the last time 57 days hence, on May 15. The premium is a $1.42 credit per contract share and the stock at the time of entry was priced at $236.64.

The implied volatility rank (IVR) stands at 95.0%.

Premium: $1.42 Expire OTM
SPY-bear call spread Strike Odds Delta
Calls
Long 291.00 89.0% 16
Break-even 283.58 87.5% 23
Short 285.00 86.0% 29

The premium is 47.3% of the width of the position’s wing.

The profit zone covers a 19.8% move to the upside.

The risk/reward ratio is 3.2:1, with maximum risk of $458 and maximum reward of $142 per contract.

By Tim Bovee, Portland, Oregon, March 19, 2020

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SPY Analysis (lot 10)

SPDR S&P 500 ETF Trust (SPY)

Update 3/20/2020One day after I entered the SPY, lot 10, short bear call spread, I exited the position. The debit at exit was $0.42 per contract share, a $0.76 profit that is 64.4% of maximum potential profit, as shares traded for $235.11 per share, up 90 cents from the entry price.

During the  lifespan of the trade the S&P 500 was executing an upward correction and a downward reverse, all at a small scale. The implied volatility rank was 65.8% at exit, down 24.0% from the entry level. The profit from the trade came largely from the rapidly declining implied volatility, along with the usual supply and demand impacts.

Shares rose by 0.4% over one day, or a +0.2% annual rate. The options position produced a 178.63% return for a +66,048% annual rate.


I have entered a short bear call spread on SPY, lot 10, using options that trade for the last time 57 days hence, on May 15. The premium is a $1.18 credit per contract share and the stock at the time of entry was priced at $234.26.

The implied volatility rank (IVR) stands at 89.8%.

Premium: $1.18 Expire OTM
SPY-bear call spread Strike Odds Delta
Calls
Long 294.00 91.0% 16
Break-even 286.82 83.5% 18
Short 288.00 76.0% 20

The premium is 39.3% of the width of the position’s wing.

The profit zone covers a 22.4% move to the upside.

The risk/reward ratio is 4.1:1, with maximum risk of $482 and maximum reward of $118 per contract.

By Tim Bovee, Portland, Oregon, March 19, 2020

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Live: Thursday, March 19, 2020

11 a.m. New York time

SPY (lot 11) analysis posted.

10:45 a.m. New York time

SPY (lot 10) analysis posted.

10:05 a.m. New York time

Elliott wave analysis: The S&P 500 continues its downward course in the 3rd wave of the decline that began March 3, within a larger scale 3rd wave of the decline that kicked off the crash on February 19. So far the entire movement from February has carried the S&P 500 down 32.8%

I entered two short bear call options positions on SPY, the first in the series expiring May 15. Analyses to come shortly.

By Tim Bovee, Portland, Oregon, March 19, 2020

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Live: Wednesday, March 18, 2020

11:45 a.m. New York time

I’ve posted results for SPY (lot 7).

11:05 a.m. New York time

SPY (lot 7) has hit half of the position’s maximum potential profit, triggering an exit. I shall update the entry analysis with results shortly.

10:55 a.m. New York time

I’ve updated SPY (lot 6) Analysis with results.

10:20 a.m. New York time

I’ve exited one of my short bear call spread options positions on SPY, lot 6, after it exceeded 50% of maximum potential profit. I shall update the entry analysis shortly with results.

My Elliott wave analysis of the chart shows the S&P 500 in the 3rd wave of the downward movement that began March 3.

By Tim Bovee, Portland, Oregon, March 18, 2020

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Live: Tuesday, March 17, 2020

11:20 a.m. New York time

In the Elliott wave model of the chart, the 3rd wave of the decline that began February 19 — the Intermediate level — and the 3rd wave of a lower degree within that decline — the Minor level — are still underway. The S&P 500 after a bit of hesitation in the early trading punched down to a new low in this decline.

The Elliott wave rules of analysis require that the 3rd wave not be the shortest of the waves moving in the direction of the trend, which is down. Either the 1st wave or the 5th wave must be shorter. The larger Intermediate level has met that requirement. The smaller Minor level 3rd wave has 7% plus change further down to go.

There are two possibilities for the remainder of the Minor 3rd wave:

  1. At a minimum, to satisfy the not-the-shortest rule, the S&P 500’s decline from March 3 would have to continue down to at least 2079.21, and there’s no rule that prohibits it from dropping further.
  2. Or, the Minor 5th wave, which is to come, would have to be shorter than the 1st wave, during which the index fell by 631.67, with no rule that says how much shorter it must be.

So, I’m fully invested for a decline, and none of my options positions has yet to reach the mandatory management point of 50% of maximum potential profit. I have no trades in sight. This will be a day of study and quiet reflection with a pot of green tea steaming by my side.

By Tim Bovee, Portland, Oregon, March 17, 2020

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SPY Analysis (lot 9)

SPDR S&P 500 ETF Trust (SPY)

Update 3/20/2020Three days after I entered the SPY, lot 9, short bear call spread, the S&P 500 bumped down, and I exited the position. The debit at exit was $0.48 per contract share, a $1.28 profit that is 72.7% of maximum potential profit, as shares traded for $235.11 per share, down $5.80 from the entry price.

SPY traded in a sideways trend during the position’s brief lifespan. As luck would have it, I entered high in the range and profited from fall to low in the range. At exit the implied volatility rate was 65.8%, down 12.4 percentage points from the entrance level.

Shares declined by 2.4% over four days, or a -6.3% annual rate. The options position produced a 266.7% return for a +24,333% annual rate.


I have entered a short bear call spread on SPY, using options that trade for the last time 32 days hence, on April 17. The premium is a $1.76 credit per contract/share and the stock at the time of entry was priced at $242.67.

The implied volatility rank (IVR) stands at 78.2%.

Premium: $1.76 Expire OTM
SPY-bear call spread Strike Odds Delta
Calls
Long 282.00 90.0% 12
Break-even 274.24 87.5% 16
Short 276.00 85.0% 20

The premium is 58.7% of the width of the position’s wing.

The profit zone covers a 13% move to the upside.

The risk/reward ratio is 2.4:1, with maximum risk of $424 and maximum reward of $176 per contract.

By Tim Bovee, Portland, Oregon, March 16, 2020

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Live: Monday, March 16, 2020

11 a.m. New York time

I’ve posted the analysis of my newly entered short bear call spread on SPY.

10:30 a.m. New York time

By my Elliott wave analysis of the chart, the S&P 500 has begun its 3rd wave of a downtrend that began March 3. The corrective 2nd wave that ended today ended near a Fibonacci level of 38%. (See the Private Trader Live post of Saturday.) Under this scenario, the 3rd wave is likely to be longer than the 1st wave, which ended Friday, because the 3rd wave is never shorter than both the 1st and the 5th. Generally, the 3rd is the longest.

The 1st wave was 631.27 on the S&P 500, so the 3rd wave under the Elliott wave rules will have a minimum downside target of 1769.90 on the S&P 500, and most like significantly lower than that. If the index fails to hit that target, then the 5th wave must be long more than 631.27 long.

(See my brief explanation of Elliott wave analysisposted February 29.)

I have entered a new short bear call spread position on SPY, the exchange-traded fund that tracks the S&P 500. I shall post the analysis shortly.

I also bought more shares of SDS, the inverse and double exchange-traded fund that moves the opposite of SPY, and at double the distance. The entry debit was $37.72 per share.

By Tim Bovee, Portland, Oregon, March 16, 2020

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Live: Saturday, March 14, 2020

5:20 p.m. New York time

As I read the chart we are now in an upward movement that corrects a portion of the decline from March 3. Some likely end points of the correction on the SPY chart, using Fibonacci numbers, are $288 (62% retracement), $280 (50%), and $273 (38%).

In Elliott wave terminology the correction would most likely take the form of a zig-zag: up-down-up more.

My bear holdings all expire April 17, so based on the chart analysis, I shall hold what I have and wait a bit before entering new positions.

I have finished updating the analyses for short iron condor options spreads with results. They all expire next Friday. The symbols, with links, are XLB, XLE, XLI, XLP and XLV.

By Tim Bovee, Portland, Oregon, March 14, 2020

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