Thursday, May 08, 2008

SPY Position

I thought I'd share with you one of my current positions and thanks to the selloff today, my IRA account is currently up 5% in 23 days. I funded this account for 2007 taxes and first traded it on 4/15/2008. I'm referring to my account's net liquidation value, so of course this is comprised of currently open trades. No guarantees. I have a variety of positions and I thought I'd show you the current risk graph for my open positions on SPY:


I switched brokerages to thinkorswim a few month's ago. I didn't share the news with you at the time and I apologize. Part of the reason why is because of the risk graph you see above and I'll tell you more about it in another post.

If you're having trouble decoding the graph, the price of SPY is along the bottom and my profits and loses are on the left side. The white line is today's value and the green line is the value at expiration in June. It doesn't look like a "standard" position risk graph, does it? That's because it's a combination of 2 spreads: a Skewed Iron Condor and a Put Diagonal (aka Diagonalized Put Calendar). You can see that I'm profitable at June's expiration if SPY is between $135.64 and $148.80 and reflects my current market outlook which is mildly bullish.

Mildly bullish? Everything has been going up like gangbusters but I don't quite understand why. I think a little hysteria could enter at any time, and we could see another drop, but the trend is up and a lot of news items are "softly" positive. It seems the market is reacting too positively and I think there's a good chance of getting hung up in this range for a couple weeks if not more.

The trend is up and as you can see I have very little to lose to the upside even if the bulls stampede to a new high before 6/21/2008 (I'd lose merely ~6% of risk). But come now, we're heading into summer which often softens the markets, in an election year which seems to have boosted volatility, and in a year where January closed down. The saying is: As goes January, so goes the year (it's not true, but often the things people believe, especially when enough of them believe it, will cause it to come true -- commonly known as a self-fulfilling prophecy). The three may just form a trifecta that blows the top off the market, but I doubt it. Those are my thoughts and I'm willing to place some bets in that general direction via a combination of option spreads. What do you think?

2 comments:

Thomas Shawn said...

Mark -

Keep up the blogging. I've got a SPY positions too, lots of vertical credit spreads but bullish and bearish (sorta like a massive, diversified iron condor).

I'm with thinkorswim, too.

Place your cursor in that graph and it'll read out what your profit is that month.

Go to the help pages in TOS! They are like a trading seminar in and of themselves!

LH said...

I read with interest your 2006 post about Interactive Brokers. I'm wondering if you still see them in such a positive light? My husband is a professional trader and we are currently in a major battle with IB right now to get our money back (they have essentially stolen it). My husband has been with them a long time with no problems until now. We already spent thousands on attorneys fees to get OUR money back and it's going to be a long process, sadly. I stumbled across you blog as I look for others who have had similar situations like ours (and there are many). Wanted to see if your opinion of IB still stands. Thanks, LH. you can email to huddy.channel-trading@gmail.com