December Iron Condor and Market Outlook

I hope all of you had a wonderful weekend. The Ducks fell to the lowly Beavers Saturday to the dismay of yours truly. A few weeks ago I was calling about rooms for the National Championship.

Anyway, enough of that, lets get down to business. With 17 days left until options expiration,our SPX December Iron Condor position looks promising. Our 300 point range has allowed for an enormous bout of volatility and yet we wil lstill make 7.9% for the expiration period (four weeks) if the underlying SPX expires between 1590 and 1290 on the SPX. Currently SPX would have to rally 8% or decline 12.4% over the next 17 days before our position is in jeopardy of taking a loss. I hate to keep repeating this, but since our last loss and significant changes to the guidelines of Iron Condor strategy the strategy has three successful trades for a total of 25.1%. Essentially, the strategy is completely different than before. Read our SPX Iron Condor post from last week if you wish to find out more.

There really isn’t too much to discuss right now. Last week I stated “..I am still expecting to see the market move lower over that timeframe with a possible retest of the 1440 area. I would not be surprised at all to see the market vacillate around in a range until the December 11 Fed meeting…”.

My sentiment hasn’t changed much. The S&P could vacillate between 1440 – 1490 for quite some time before we the spike outside the range. A break out of the range should be sharp and sustainable. Friday could lead to a move beyond the range as it seems all eyes are on the upcoming payroll report due out Friday. Just one more reason to expect a range bound market over the next trading few days.

I think Kirk agrees. Check out Moody Monday for a nice snapshot of SPX.

Also, check out my post Bearish November Leads to Bullish December. If you haven’t had a chance to read it just click on the link above. I think you will find it well worth the effort. December is one of the strongest months of the year, especially when follwoing a weak November.

Have a great night!

Overbought/Oversold for December 3, 2007

S&P (SPY) - 60.8 (neutral)

Russell 2000 (IWM) - 50.6 (neutral)

Dow (DIA) - 62.3 (overbought)

Nasdaq 100 (QQQQ) - 52.8 (neutral)

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