SPDR S&P 500 ETF (SPY)

Update 4/26/2019: I exited SPY for an $0.83 loss on April 26, which is 21 days prior to expiration. Shares were trading at $291.53, or $9.17 above entry. Although the share price remained slightly below the break-even price, SPY had done nothing but rise since I had entered, and given the low implied volatility rank, I saw greater risk of greater loss rather than a profit.

I’ve seen Elliott wave analysis do this before — continue to trend upward even when the requirements for that uptrend are completed. The problem is with Elliott there are n boundaries in the direction of the trend except for the wave count, and waves can subdivide ad infinitum, allowing endless opportunities to say, in retrospect, “See, I was right.” 

Another problem with Elliott wave analysis, which is shares with every technical analysis device that I’ve seen, is that while it can say useful things about price, it is blind to time. As an options trader, time is of utmost importance for me. Time blindness, then, is a problem.

So going forward, I may consult Elliott wave analysis, but all trades, whether based on Elliott or not, will follow the same set of trading rules.

On this trade, shares rose by 3.3% over 37 days, or a +32% annual rate. The options position lost 53.6% for a -528% annual rate.

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On March 20 I entered a short call spread on SPY, using options that trade for the last time 58 days later, on May 17. The premium is a $0.72 credit and the stock at the time of entry was priced at $282.36.

The profit zone for this position is $292.28 and lower.

I entered the position based on bearish signals using Elliot wave analysis.

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VanEck Vectors Junior Gold Miners ETF (GDXJ)

Update 4/26/2019 : I exited GDXJ on April 26, which was 21 days prior to expiration, for an $0.89 debit, with shares at $29.92 per share. The loss on the position was $0.27 after a $2.38 decline in the shares price.

The price drop followed a decision by the Federal Open Market Committee, announced March 20, to stop raising interest rates. Basically, this is gold acting in its traditional role as a hedge against inflation.

Shares declined by 7.4% over 42 days, or a -64% annual rate. The optins position produced a loss of 30.3% for a -274% annual rate.

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On March 15 I entered a short iron condor spread on GDXJ, using options that trade for the last time 63 days later, on May 17. The premium is a $0.62 credit and the stock at the time of entry was priced at $32.30.

The profit zone for this position is between $36.62 on the upside and $27.62 on the downside.

I entered the position before formally restarting with my new trading rules.

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10:25 a.m. New York time

My two remaining positions that expire in 21 days are the bad boys: DIS and STNE, both of them iron condors that have moved beyond their profit zones, in defiance of high probabilities that they would remain within their zones. Driving home again the undeniable truth: Probabilities aren’t certainties. Q.E.D.

They are both in such awful shape that I may wait until Monday just to see what happens. DIS is dropping a bit back toward profitability, which might slightly mitigate the loss. STNE is zig-zagging sideways.

10:15 a.m. New York time

It’s 21 days until the May monthly options expire. Time to exit my positions built from those options.

Exited so far: EA and TWLO for a profit, GDX and SPY for a loss.

Results and details will be late today, due to a post-op medical appointment following yesterday’s lens replacement surgery.

By Tim Bovee, Portland, Oregon, April 26, 2019

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10 a.m. New York time

Friday according to my trading rules is when I shall exit the May monthly options, 21 days before expiration. That deadline involves five short iron condor positions: TWLO, DIS, EA, GDXJ and STNE. In addition, a short bear put vertical spread on SPY, using a different strategy, is in a losing position.

TWLO and EA are showing a profit if I were to exit today. The others are showing a loss at this point, and three of those — DIS, GDXJ and STNE — have moved beyond the profit zone, defined as the region between the short call strike price and the short put strike price. All in all, barring large price moves, it’s shaping up to be a dismal Friday.

The strategy I’m using relies on wide profit zones giving an 85% or so chance of expiring with a positive return. As always in that sort of statistical setup, it’s not a 100% guarantee, since there is a 15% chance that a position will incur a loss. April has turned out to be a 15% sort of month for these positions.

But, it’s not over yet, so we shall see what happens today into Friday.

By Tim Bovee, Portland, Oregon, April 24, 2019

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10:20 a.m. New York time

DIS remains above the profit zone, and STNE below, each short iron condor having moved out of range upon news reports.

There are seven days before the positions reach their mandatory exit if profitable, and 28 days until expiration.

By Tim Bovee, Portland, Oregon, April 19, 2019

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Canopy Growth Corp. (CGC)

Update 5/16/2019: My short iron condor position on CGC reached 50% of maximum potential profit, and line with my trading rules, I took to the profit. I exited for a $0.49 debit, leaving $0.48 of my entry credit as profit. Shares rose by $2.20 during the lifespan of the position. On the chart, the share price rose from my $43.09 entry to a peak of $52.74, and then declined to the exit price of $45.29.

Shares saw a net rise of $5.1% over the 29 days of the position, or a $64% annual rate. The options produced a $98.0% return for a +1,232.93% annual rate.

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This is a roll forward to a June 21 expiration of a position exited April 17.

I have entered a short iron condor spread on CGC, using options that trade for the last time 65 days hence, on June 21. The premium is a $0.97 credit and the stock at the time of entry was priced at $43.09.

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Canopy Growth Corp. (CGC)

Update 4/17/2019: I exited my short iron condor on CGC, 29 days after entering the position and nine days prior to mandatory exit when the options have 21 days left before they expire. The implied volatility at exit was 46. I exited for a $0.62 debit with shares at $42.86.

Shares declined 6.7%, or $3.08. during the holding period, or an 84% annual rate. The options position produced a 117.7% return, $0.73, for a +1,482% annual rate.

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On March 19 I entered a short iron condor spread on CGC, using options that trade for the last time 59 days later, on May 17. The premium is a $1.35 credit and the stock at the time of entry was priced at $45.93

The implied volatility rank (IVR) at entry stood at 47.

Premium:	$1.35	Expire OTM
CGC-iron condor	Strike	Odds	Delta
Long	60.00	91.0%	13
Break-even	56.35	86.5%	18
Short	55.00	82.0%	23
Puts
Short	37.50	76.0%	17
Break-even	33.85	82.0%	12.5
Long	32.50	88.0%	8

The premium is 28% of the width of the position’s wings.

The risk/reward ratio is 2.6:1.

By Tim Bovee, Portland, Oregon, April 17, 2019

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2:35 p.m. New York time

I’ve entered a new position on CGC using options expiring June 21. Analysis to come.

11:05 a.m. New York time

I’ve exited my short iron condor on CGC for $0.62, or 54% of maximum potential profit. Full analysis to come.

By Tim Bovee, Portland, Oregon, April 17, 2019

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5:45 p.m. New York time

No fill on CGC.

11:10 a.m. New York time

I’m making another attempt to exit my iron condor on CGC. The position sunk to a debit of $0.76, which is 43% of maximum potential profit. My goal at or above 50%, and so I set the order bid at $0.67.

DIS, after last week’s large upward gap, is trading at $130, which is above the upside breakeven of $126 but within the wing, which provides some shelter up to $135. With 10 days left until mandatory exit (21 days prior to expiration), I’m happy to let things play out without any adjustment to the position.

By Tim Bovee, Portland, Oregon, April 16, 2019

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1:10 p.m. New York time

No fill on my CGC exit order.

12:05 a.m. New York time

I entered an exit order on CGC, which is at 44% of maximum potential profit. The exit bid is for a $0.67 debit, or 51% of max.

DIS opened 10% higher than the prior day’s close, from $116.60 to $127.91, challenging the upper side of my iron condor, after the company announced the launch date and pricing of its new Disney+ streaming service.

Thanks to the wide profit zone dictated by my new trading rules, the higher open was only $1.91 above the upside breakeven point, suggesting a good chance of recovery back to profitability in the 35 days left before expiration.

Under my rules, I exit 21 days before expiration, which is two weeks from now. In this case, whether I honor that rule or not will depend upon the chart.

I checked out the advisability of adjusting the unchallenged side but judged the challenge to be insufficiently strong to warrant action at this time.

By Tim Bovee, Portland, Oregon, April 12, 2019

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