Closing Trades to Take Some Profits as Market Broke above Upper Boundaries

The stock market continued to show bullish strength today by crossing the 2 month long upper line of the up-trending channel by SPY & QQQ and above the upper Bollinger band, as shown in the charts below. The NYSE & NASDAQ trading volumes were lower than those in yesterday. It was a difficult time to take profits since there were no visible signs of market weakness based on price patterns.

 

However, the exit rule of my diagonal spread for my positional trades was met today for some of my positions. Basically, the rule specifies that when the Delta of the long option exceeds 0.80, the diagonal spread can be closed for profits for positional trades and rolled out for longer term trades.  The high Delta value and the crossing of the upper boundaries made me to decide to close some SPY & QQQ positions for profit. I’ll wait for a few weeks to see if there are new entry points on these ETF’s and manage remaining positions as market evolves.

The entry, rolling adjustments, and exits of the QQQ December 29, 2017 Call which was a position in a different account from the last post is shown in the chart above. The summary of the QQQ diagonal trades is listed in the table below. In reviewing the trades, it’s obvious that I had held the short calls for too long such that the overall profit was 28% only while the targeted profit could be 50% or more.

Date	Spread	Side	Exp	Strike	Price	Net Price	Total Cost
4/5/2017	SINGLE	BUY	29-Dec-17	127	10.63	10.63	10.63
4/12/2017	SINGLE	SELL	5-May-17	133	0.79	0.79	9.84
4/24/2017	DIAGONAL	SELL	19-May-17	136	0.58	-1.14	9.26
4/24/2017		BUY	5-May-17	133	1.72	DEBIT	10.98
5/1/2017	SINGLE	BUY	19-May-17	136	1.81	1.81	12.79
5/17/2017	SINGLE	SELL	9-Jun-17	139	0.83	0.83	11.96
5/25/2017	DIAGONAL	SELL	16-Jun-17	143	0.49	-1.92	11.47
5/25/2017		BUY	9-Jun-17	139	2.41	DEBIT	13.88
6/2/2017	DIAGONAL	SELL	29-Dec-17	127	18.03	16.86	-4.15
6/2/2017		BUY	16-Jun-17	143	1.17	CREDIT	-2.98

In the meantime, I decided to keep 1/3^rd of the QQQ diagonal spread for longer term trade. Since the December 29, 2017 $127 Call has its Delta about 0.82, I rolled out 3 more months to March 16, 2018 and raised strike price to $136 which had Delta around 0.65. As explained in the previous post, the rolling reduced the overall position Delta. I might need to adjust the short June16 $143 call if QQQ keeps rising.

On the SPY bullish positions, I sold diagonal call spread September 2017 $229/June 2017 244.50 Call for $15.31 as the long call had Delta over 0.80 as well. I’ll analyze the SPY diagonals in the future in a trade review.

My other diagonal call spread on MU was adjusted as well since the short call Delta reached over 0.65 and MU price action was strong. Thus, I bought back the June 9 $30.5 call and left the October 20 $27 call which was bought around May 11th naked. The MU stock chart is shown below.