RVPCS – 10.02.2015

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Russell 2000 – Vertical Put Credit Spread

Russell 2000 futures (/TF) are down this more on poor reports regarding employment.  Per Econoday:


“Forget about an October rate hike and maybe forget about a December one too. The September employment report came in weaker than expected on all scores with nonfarm payroll at 142,000, well under the low estimate for 180,000. To seal the matter, downward revisions to the two prior months total 59,000. Average hourly earnings also came in below the low end estimate, at an unchanged reading and a year-on-year rate of 2.2 percent which is also unchanged. And the labor market is shrinking! The labor participation fell 2 tenths to a nearly 40 year low of 62.4 percent.

It should be no surprise, after all the regional and private indications over the past several weeks, that manufacturing is hurting. Payrolls fell 9,000 after falling 18,000 in August. These are job losses that can be blamed on weak foreign markets together with the negative effect of the strong dollar. Mining has also been hurting, the result here of low commodity prices. Payrolls in this industry fell 13,000 on top of August’s 22,000 decline.

In contrast to manufacturing, there have been strong signals coming from retail which added 24,000 in September. Professional & business services also rose, up 31,000 which however is half the rate of gain from the spring and early summer.

Weekly hours fell 1 tenth to 34.5 hours in another sign of weakness. Private payrolls rose only 118,000 with government jobs adding a respectable 24,000 share. Another detail on manufacturing is a big 0.6 percent decline in hours that points to contraction for the industrial production report.

It doesn’t get much worse than this, at least relative to expectations. This is a shock that however has been hinted at by reports such as Empire State or the Kansas City Manufacturing survey. There will have to be a big bounce in next month’s October report to make a rate hike a real possibility at the December FOMC.”

The market has been down for the week as well.  The technical indicators are bearish and potential oversold.  However, where is the bottom?

The FOMC meeting minutes for next Thursday is a spooky proposition with the position holding through the afternoon and into the night until expiration on Friday morning.  Will the FED give the market information it desires?  No rate hike?  Are we reaching a point where the market is less and less concerned with QE/ZIRP and more concerned with the state of the economy!?

Now the markets appear to be coming off the ever increasing all time high mode.  This is opening the opportunity for Iron Condor set ups.  This is something I will be considering.  The analysis’s will work for either PUT (Bullish when sold) or CALL (Bearish when sold) positions.

I am targeting strikes between 1010 and 990 with the statistical, technical, historical, news, and open interest metrics providing relative assurance of a RUT price at or above this range between now and expiration morning on October 9 (OCT2) of this coming week.

1. Standard Deviation (6 days to expiration):

Price 1086
Implied Volatility 25.51%
1 σ 1050
2 σ 1015 (always chosen for RVPCS)

2. Technicals:

Donchian 1074 lower and 1190 upper channel
RSI 32.925 (1 year low = 21.6)
MACD -22.154, above signal line and below zero with the signal line below zero
Fibonacci Retracements Not Available

Please note the chart below was taken for the futures (/TF) price before opening bell:

RUT _ 10.02.2015

*Charts from Trade Architect™

3. Historical Price Compare:

Time Frame:
For the past 1.5 years



4. Open Interest:

Price at 1086, PUT OI peaks at 1070, 1040 to 1020, and 1030 as seen below. Note that the orange highlight is reflecting the price fluctuation as calculations were being performed.


5. News: International Trade, Jobless Claims, FOMC minutes

economic calendar _ for week 10.05.2015

*From Econoday.com

Disclaimer: The information presented does not consider your personal investment objectives and should not be taken as a recommendation. Further, it shall not be construed as an offer to sell or a solicitation to buy any security mentioned. The risk of loss in any stock, option, or futures trade can be substantial. Consider all relevant risk factors before trading.

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