1 p.m. New York time

I’ve entered a long iron condor position on GDX and have posted the analysis.

10:45 a.m. New York time

My short iron condor order on QQQ has been filled, and I have posted the analysis.

10:25 a.m. New York time

I’ve placed a short iron condor order on QQQ. My asking price is $1.85.

9:50 a.m. New York time

I’ve added IYR to my managed shares after a buy signal from the Fisher Transform. The confirmation was a visual inspection of the chart trend. One slot remains empty. Here’s the portfolio:

sym	slot #	price $	sector
GDXJ	1	40.79	metals
SLV	2	15.88	metals
ARKW	3	50.11	technology-internet
IYR	4	91.51	real estate

By Tim Bovee, Portland, Oregon, August 9, 2019

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4:40 p.m. New York time

My order on EEM expired unfilled.

10:05 a.m. New York time

I’ve placed an order for a short iron condor on EEM. My asking price is $0.55. No fill yet.

9:35 a.m. New York time

I’ve added ARKW to my managed shares portfolio, for an entry price of $50.11. The Fisher Transform gave a buy signal yesterday, and the trend is confirmed by a Bullish Engulfing candlestick pattern.

 

 

This brings my holdings back to three as the markets settle after the large drop earlier in the week.

sym	slot #	price $	sector
GDXJ	1	40.79	metals
SLV	2	15.88	metals
ARKW	3	50.11	technology-internet
(empty)	4
(empty)	5

I declined 11 Fisher Transform buy signals from Wednesday because they lacked trend confirmation. They are ACWX, BBJP, EIDO, EWC, EWJ, EWP, EWQ, EWT, XHB, XLU and XLY.

By Tim Bovee, Portland, Oregon, August 8, 2019

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SPDR S&P 500 ETF (SPY)

Update 8/26/2019: I’ve exited my short iron condor position on SPY for 50% of maximum potential profit. The exit cost as a $0.76 debit, for a profit of $0.76, with shares trading at $287.82, up $2.94 from the price at entry.

SPY fluctuated during my holding period within a $10 range. The implied volatility rank declined by 20.5 points to 45.1% at exit.

Shares rose by 1.0% over 19 days for a +20% annual rate. The options positions produced a 100.0% return for a 1,921% annual rate.

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I have entered a short iron condor spread on SPY, using options that trade for the last time 44 days hence, on September 20. The premium is a $1.52 credit and the stock at the time of entry was priced at $284.78.

The profit zone for this position is between $301.52 on the upside and $251.52 on the downside.

The implied volatility rank (IVR) stands at 65.6%.

Premium:	$1.52	Expire OTM
SPY-iron condor	Strike	Odds	Delta
Long	303.00	92.0%	9
Break-even	301.52	89.0%	11.5
Short	300.00	86.0%	14
Puts
Short	261.00	83.0%	14
Break-even	251.52	86.5%	11.5
Long	250.00	90.0%	9

The premium is 21.7% of the width of the position’s wings.

The risk/reward ratio is 3.6:1. Each contract carries $548 in maximum potential loss compared to $152 in maximum potential profit.

By Tim Bovee, Portland, Oregon, August 7, 2019

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12 p.m. New York time

I’ve posted the analysis of SPY.

11:55 p.m. New York time

I’ve entered a short iron condor position on SPY. Details to follow.

10:10 a.m. New York time

Metals are all that’s worth buying out of my managed shares pool. I added SLV to GDXJ, and I still have three empty slots.

sym	slot #	price $	sector
GDXJ	1	40.79	metals
SLV	2	15.88	metals
(empty)	3
(empty)	4
(empty)	5

One reason for the paucity of trades is my new rule requiring that the symbol be in an uptrend. At this point I’m using the gut-feel method — I know an uptrend when I see it — and will, if the opportunity presents itself, use such things as Japanese candlestick patterns to resolve ambiguities.

Only SLV qualified for a trade when trend was added to the mix. The buy signals rejected because of their trends were BRZU, DBA, EEM, EPI, EWH, EWM, EWW, EWZ and RSX. So clearly, at this moment, the trend requirement is quite limiting. In a future up market, the trend requirement won’t be limiting at all, since almost every sector will be trending upward. That makes the trend an invaluable tool because it ties my trade selections to the Zeitgeist of the markets. Or, as wise old traders with a liking for shibboleths habitually put it, “The trend is your friend.”

By Tim Bovee, Portland, Oregon, August 7, 2019

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iShares Russell 2000 ETF (IWM)

Update 8/20/2019: My short iron condor position on IWM reached 50% of maximum potential profit, and I exited for a $0.90 debit — half the credit received at entry. Shares at exit were trading at $149.25, which is $1.12 above their level at entry.

IWM meandered in a sideways movement during the holding period, and that was reflected in the implied volatility rate, which fell by 19.8 points from the entry level to 29.0% at exit.

Shares rose by 0.8% over 14 days, or a +20% annual rate. The options position produced a 100.0% return for a +2,607% annual rate.

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I have entered a short iron condor spread on IWM, using options that trade for the last time 45 days hence, on September 20. The premium is a $1.80 credit and the stock at the time of entry was priced at $148.13.

The profit zone for this position is between $156.80 on the upside and $126.80 on the downside.

The implied volatility rank (IVR) stands at 48.8.

In building the trade, I skewed it to provide a deeper profit zone to the downside.

Premium:	$1.80	Expire OTM
IWM-iron condor	Strike	Odds	Delta
Long	162.00	93.0%	7
Break-even	156.80	84.0%	16.5
Short	155.00	75.0%	26
Puts
Short	132.00	87.0%	12
Break-even	126.80	90.0%	9
Long	125.00	93.0%	6

The premium is 25.7% of the width of the position’s wings.

The risk/reward ratio is $520 to $180 per contract, or 2.9:1.

By Tim Bovee, Portland, Oregon, August 6, 2019

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11:55 a.m. New York time

My IWM order has been filled. I’ve posted the analysis.

11:35 a.m. New York time

And — happy days! — it’s time to begin repopulating my short iron condor options positions. And what a good time it is! Implied volatility rankings on market-wide exchange traded funds has leapt to high levels from the IVR swamp of despond where they have languished for much of the year.

This round, the options expiring September 20, 2019, I shall focus on those market-wide ETFs. I’ve entered an order for the first, IWM, which tracks, the Russell 2000, but have not yet gotten a fill.

Today is 45 days prior to expiration, and I’ll be pacing my position entries over several days in order gain some time diversification.

I’m choosing that strategy because of a study discussed last month on the financial network TastyTrade, an outfit that does the most useful options trading studies that I’ve seen, ever. This study looks at outcomes by the category of underlying, and find that the broad market positions tend to do best. The discussion, broadcast July 16, can be watched here.

10:40 a.m. New York time

In yesterday’s post, I mused about whether there’s an improvement to my signaling method that would reduce the likelihood of whipsaws. Having slept on it, I’ve concluded that there’s really no metric that would help. All it would do is take one of the most sensitive yet whipsaw-avoidant signaling algorithms around, the Fisher Transform, and turn it into something less sensitive.

The reality is that whipsaws tend to happen when markets are changing trend, topping or bottoming. And that’s something where we all have a built-in algorithm. Our vision and brains together constitute one of the best visual pattern recognition systems around. We know a trending stock chart when we see it. We know topping and bottoming behavior when we see them.

So going forward I shall confirm the Fisher Transform buy signal by looking a the stock chart and judging whether the greater trend is in to the upside. If it is, then it’s a buy. EWM, for example, was giving a Fisher Transform buy signal this morning. But the chart shows a decline from July 10. True, the price moved higher today compared to yesterday, but as a wise mentor told me years ago, “One day does not a trend make.” Another mentor added, ” Right. It’s three days. It takes three takes to make a trend.” Well, whatever. Like you, I know a trend when I see it.

So I rejected EWM, despite the signal. Another signal was GDXJ, and it is clearly in an upward trend. I entered GDXJ for a debit of $40.96 per share. It is, presently, the only managed shares position I have, the rest having been shot down by sell signals over the last two days.

By Tim Bovee, Portland, Oregon, August 6, 2019

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2:20 p.m. New York time

By the rule book on Tuesday I’ll start entering my options positions that expire September 20. Tuesday is 45 days prior to expiration.

My managed shares positions had been reduced to one by Friday’s sell signals, executed this morning, and a sell signal this morning removed the last position from the board.

Sold are EWM, XBI, XHB and XOP, with these results:

• EWM, bought $28.55 on Aug. 1, sold $27.95 on Aug.  5, $-0.60 loss. Shares declined by 2.1% over three days for a -256% annual rate.
• XBI, bought $86.76 on July 31, sold $82.08 on Aug. 5, $-4.68. Shares declined by 5.4% over five days for a -394% annual rate.
• XHB, bought $42.07 on Aug. 1, sold $40.31 on Aug. 5, $-1.76 loss. Shares declined by -4.2% over four days for a -382% annual rate.
• XOP, bought $25.16 on July 31, sold $22.43 on Aug. 5, $-2.73 loss. Shares declined by 10.9% over five days for a -792% annual rate.

The positions prepped for entry were CORN, GLD and XLU, and I added FXE for the position vacated this morning.

But I’m passing on those trades for now, given the Sturm und Drang in the markets after China allowed its currency to weaken.

As the economist Paul Krugman tweeted this morning, “Trump’s latest tariffs may look like the world trade equivalent of the assassination of Franz Ferdinand — the event that tripped an uneasy situation into all-out trade war.” I mean, who wants to hold shares as the guns of August are rolling into place?

Speaking of Sturm und Drang, my early results with this experimental method have produced way more churn than I anticipated. Could be intrinsic to all markets. Could be an artifact of this time and these markets. I’ll use the time-out enforced by the heightening tariff war to think about ways to smooth the signaling.

By Tim Bovee, Portland, Oregon, August 5, 2019

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1:35 p.m. New York time

I’ve updated my thought experiment on hedged earnings plays with a day-after observation. See Thought Experiment: An IBM earnings play.

10:05 a.m. New York time

I exited my managed shares positions XLE and XLV after each received a sell signal. I had only one buy signal that I could reasonably use to fill a slot: EWM, which I entered for $28.55 a share.

XLE produced a 0.6% loss over two days, or a -115% annual rate. The price change was down 39 cents.

XLV produced a 1.1% loss over four days for a -103% annual rate, a decline of $1.04.

Here’s the lineup:

sym	slot #	price $	sector
(empty)	1	#N/A
EWM	2	28.55	intl-malaysia
XBI	3	86.76	biotech
XHB	4	42.07	real estate
XOP	5	25.16	energy

By Tim Bovee, Portland, Oregon, August 2, 2019

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1:40 p.m. New York time

I’ve updated Thought Experiment: An IBM Earnings Play with results and conclusions.

1 p.m. New York time

My paper-trade on IBM, part of a thought experiment on hedging earnings plays, triggered an exit, for a $2.38 debit with shares at $151.88. I’ll update the analysis shortly with full results.

I’ve made three swap outs on the managed stocks account. I exited FXE and GLD on sell signals. I entered XLE and XHB, in the energy and real-estate sector, respectively. Here’s the new line-up:

sym	slot #	price $	sector
XLE	1	62.11	energy
XLV	2	92.21	health care
XBI	3	86.76	biotech
XHB	4	42.07	real estate
XOP	5	25.16	energy

The FXE exit credit was $105.19, producing a 0.8% (80 cents) loss over one day, or a -276% annual rate.

The GLD exit credit was $133.41 , producing a -1.1% ($1.45) loss over one day for a -392% annual rate.

The new line-up leaves me overweight in energy, with two positions.

By Tim Bovee, Portland, Oregon, August 1, 2019

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10:20 a.m. New York time

Some sell signals on my Robinhood shares account: QAT and WEAT.  That gave me four slots to fill, which I did. Here’s the new line-up, with XLV being a hold-over:

sym	slot #	price $	sector
FXE	1	105.99	currency-euro
XLV	2	92.21	health care
XBI	3	86.76	biotech
GLD	4	134.86	metals
XOP	5	25.16	energy

The exits:

QAT, out at $17.93, producing a -0.4% (7 cents) loss over 2 days, or a -71% annual rate.

WEAT, out at $5.34, producing a -2.65 (14 cents) loss over 2 days, or a -466% annual rate.

Here’s a write-up on the methodology.

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

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