August 22, 2017

Archives for March 2007

Premium is back!

Volatility has finally made its way back into the market. For months the market had been lulled into a period of complacency and as a result, option premium suffered. The VIX, often referred to as the "investor fear gauge" touched historical lows months ago and remained there for what seemed like an eternity for option sellers. Now, with the recent decline, option premium has returned to an attractive level. The timing could not be better for our Iron Condor strategy. The extra premium allows us to widen our chosen range and increase our monthly premium. Some may choose to keep their range the same and bring in more premium. Yes, that is certainly an option, but after an extreme jump in volatility I would be hesitant to make such a move. … [Read more...]

Short-term Seasonal Weakness Lies Ahead

I am going to keep it very brief tonight. Short-term seasonal weakness lies ahead. Every month around options expiration I state that the trading day following options expiration is bearish and I do not expect price action to be much different this time around. I am still hesitant to step in until I see more of a extreme reading in our overbought/oversold readings, so I will patiently wait on the sidelines until  a highly probable set-up occurs. Expirations have a tendency to start out sideways and drift slightly higher as the day progresses. The real action should begin next week. Sorry to keep it so short tonight, but I think I might be coming down with a case of March Madness. Tomorrow I will discuss the upcoming condor … [Read more...]

Today’s Reversal and Extra Premium

The "potential short-term bounce in the making" that I talked about yesterday occurred as expected. SPX hovered above the 1374 support area that I mentioned yesterday for the first half hour of the trading day before fall ing back to the 1374 support area that I have talked about over the last few days. SPX bounced quickly off the 1374 area and moved back to the opening highs before falling back to the 1374 area around noon. This time the support wasn't there and we witnessed a wash out situation which brought SPX as low as 1364 before the sharp intraday reversal occurred. The bounce began around 1 EST and lasted until the close.   It looks like the bounce could continue for the next few days, which would play out exactly like the … [Read more...]

Spike in premium should bode well for the SPX Short Iron Condor Strategy. Potential short-term bounce in the making.

The heavily anticipated short-term decline came today. Our measures are now oversold (SPY) to near oversold. Ideally, I would like to see an additional push lower before taking a position so until then, as always, I will wait patiently on the sidelines.  More specifically, I will be closely watching the lows established on 3/5, approximately 1374 in SPX, to see how the market reacts. I expect to see some choppiness around this area before a definitive move occurs. The VIX is back up to 18.13 which should create a opportunity to collect some decent premium in our SPX Short Iron Condor strategy. This should also give us the opportunity to open up our range a bit as well which should always be an important consideration during volatile … [Read more...]

How long before the bears reappear?

The market managed to squeak out a small advance today. The advance over the last few trading days seems to be running out of steam. Our daily overbought/oversold readings on the major benchmarks (below) are currently in a neutral state, however, our shorter-term overbought/oversold measures are nearing an extreme state. Most likely if we do see additional gains in the major benchmarks over the next few days they will be limited. Ideally, I would like to see the indices push higher into an "overbought" state as this would most likely signal a short-term bearish trade. I don't think the bulls have enough room to push the indices into a "very overbought" state which is typically what I like to see before entering a … [Read more...]

Will the market test the recent lows?

The bulls had a decent week, but it seems as though there is a lack of conviction in the attempted push higher. This often leads to struggles, at least in the short-term, going forward. So obviously I do not think the bulls are out of the woods yet. Historically, the week of options expiration is fairly strong with Tuesday being the best performing day on average. Friday is the worst performing day during expiration week and as my loyal followers know (as I state it every month around this time) the trading day following options expiration is historically bearish. It is quite possible that we could see this seasonal tendency play out particularly if the market is able to push our indicators back into an overbought state. Currently our … [Read more...]

Introducing – SPX Short Iron Condor

You may read some of our trading guidelines below as well as a sample trade that was published in our newsletter ahead of the December option expiration cycle. Advantages of the Short Iron Condor Strategy – Crowder Style 1.The strategy is a credit spread which means time decay is your friend. Most options traders lose value as the underlying index moves closer to expiration. This is not the case witht he Short Iron Condor strategy, as the underlying SPX moves closer to expiration and remains in our chosen range the strategy makes money. 2. The strategy is a one-month trade (expiration to expiration) that does not require constant monitoring off the market. 4. Can make 4% to 14% a month. 5. Uses the tracking stock for the … [Read more...]

Where will the consolidation lead?

Will the recent consolidation lead to another test of the recent lows? As I have stated over the past few days, I think so. While the market moved notably higher yesterday it still was unable to move our overbought/oversold significantly higher. Furthermore, our shortest-term overbought/oversold indicators still have plenty of room until the probability for a short-term decline is significant. Until we see another extreme, it is a guessing game in my opinion which is why I would rather stay on the sidelines at this point. This is one of the keys to success for our ETF Extremes strategy. I apologize for the short posts recently. I am concentrating my efforts on updating the website and the newsletter. I should be back with some … [Read more...]

Anticipated short-term bounce occurs. What next?

The anticipated bounce off very oversold levels occurred today. The move was sharp, yet it still was unable to bring the major benchmarks above 50 which is often a sell signal for many traders. I expect to see the push higher continue until weeks end, but I am still somewhat leery about the sustainability of the move. I would not be surprised to see the market test the recent lows and potentially break through those levels. We shall see soon enough. The Vix moved lower today, losing 18.7%. Ideally, I would like to see the Vix back near 20 or at least hover around  the 15-20 range as premiums will be significantly higher as a result. This will make options selling strategies, like our SPX Short Iron Condor, much more attractive. The … [Read more...]

A surge in the VIX

Volatility has picked up at an alarming rate. On Feb. 22 the VIX hit 10.01 and today it had a high of 20.41. A 100% gain in just seven trading days. The market hasn't seen a surge in volatility like that in years. Is this the beginning of a seller's market. Option sellers have had a rough go at it over the past few years as premium has hovered around historical lows. Now that premium is once again an item we could see a surge in option selling strategies among many option-savy traders. The sharp sell-off has pushed our oversold measures into near extreme levels. I would like to see a move lower, possibly a wash out, before I considering a position. Our shortest-term oversold measures are signaling that a short-term bounce could occur … [Read more...]