MELT UP

“It’s a luscious mix of words and tricks that let us bet when you know we should fold ” – The Shins

The stock market crossed the 30 trillion dollar mark on Friday.  It just won’t stop.  And the money just keeps pouring in.

I closed Trades 14 and 15 last week.  Trade 14 on CL (Crude Oil Futures) was closed for a 10.4% gain in 21 days.  I’m really liking the volatility present in CL which provides a lot more profit potential.  Trade 15 on the SPX was closed for a 2.0% gain in 20 days.  It’s been a slow grind on the SPX since the market continues to melt up.

Due to the extreme low volatility in the SPX, going forward I’ll be introducing a 3rd market neutral butterfly on the RUT.  The RUT is the Russell 2000 index which represents small-cap stocks.  I’ll be splitting my market neutral trades into 1/3 positions in the SPX, RUT and CL.  This helps diversify and smooth returns since each have very different market movement and volatility profiles.

Below are my 4 current positions including the 3 market neutral butterflies that were all added at the end of last week.

XIV – Currently right at $144.75 which puts me up 35% in 59 days.  No plans to close position unless my indicators start showing signs of weakness.

CL (Trade 16) – April expiration and strikes at 64.5-62.5-69.5.  Currently down 0.6% mostly due to commissions which I factor into the profit/loss.

SPX (Trade 17) – Expiration is February 12th and strikes are 2790-2760-2715.  I brought the expiration closer than normal on this to try and extract more premium.  Currently down 0.4% mostly due to commissions.

RUT (Trade 18) – Expiration is February 16th and strikes are 1600-1570-1520.  Currently up 1.1%.

I’ll be updating these trades over the next 1-2 weeks.  Earnings season is here so it will be interesting to see if that keeps fueling the unrelenting move up. This will be the final quarter that companies are subject to the 35 percent corporate tax rate and I’m sure they will be providing guidance on how the new tax structure will affect them.