August 19, 2017

August Expiration Cycle

Today’s SPX Short Iron Condor trade went as planned. In our Expiration Report (paid subscribers only) we mentioned how we were going to attempt to bring in $1.20 for a 170 point range. We were able to meet those expectations today and as a result the Iron Condor strategy will make 12.9% over the next four weeks if the underlying SPX expires within our chosen 170 point range. The strategy will be positive on a cumulative basis if the strategy is successful during the August Cycle. (paid subscribers can read more on the Insider’s page under Condor Trades).

Our switch after the April Cycle to trade only four weeks out (wait a week in a five week cycle) while widening our range to at least 160 (170 this month) has proven successful so far. This is where we admittedly made our mistake in April. We went with a 100 point range which is way too tight for this market and our comfort level. A range of 100 points only required a move of roughly 3.3% before the short call/put strike were in risk of being breached.  Furthermore, at that time the VIX was hovering around 13, which forces us to bring in less premium, but in the future if we ahve to take only a 5% gain while keeping our range around 160 points we will do so. The goal of this strategy is to stay in the game and not be greedy. Take small profits on a monthly basis and when the volatility is high take in more premium, but also use it as an opportunity to widen your range. Be smart!

With that being said, a range of 170 points will allow the underlying SPX to move/up down approximately 5.3% before the short call/put strike is in risk of being breached. Barring a major catastrophe or a significant rally, that would be quite a task for a major benchmark to move over the next four weeks.

If you would like to learn more on how we trade our Iron Condor’s check out our White Paper (http://www.crowderinvestments.com/white_paper.php) or become a subscriber to our SPX Short Iron Condor Strategy (http://www.crowderinvestments.com/amember/signup.php#product11). We limit our subscribers so reserve your spot today.

As I mentioned last week the close tomorrow officially ends the mid-July weakness and Wednesday brings a very bullish seasonal day with 71% of all those days (since 1985) advancing. It could be convenient timing indeed and one that could bode well for our ETF Extremes strategy.

I still expect the market (S&P) to move back within the trading range that has been established since early May. The end of July is typically strong, but August has become the worst S&P month in the past 19 years, second worst in th Dow and Nasdaq according to the Stock Trader’s Almanac (a must have for any serious trader). Also, the gap on July 12th is still out there and the S&P looks like it wants to close it before any serious attempt upwards reconvenes. I will talk about August seasonality as we move closer to the beginning of the month. .

Overbought/Oversold levels for July 23, 2007

  • SPY – 51.1 (neutral)
  • IWM – 28.4 (neutral)
  • DIA – 62.0 (neutral)
  • QQQQ – 66.9 (neutral)
  • GLD – 82.7 (very overbought)
  • OIH – 82.6 (very overbought)

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Andrew Crowder, Chief Investment Strategist, www.crowderinvestments.com