August 20, 2017

January 2008 Expiration Cycle – Iron Condors

Santa continued to bring short-term chher to the markets today. As a result, the tech-heavy NASDAQ 100 (QQQQ) joined the Russell 2000 (IWM) in overbought territory with the other two major indices we follow trailing close behind.

In our Expiration Report Saturday we mentioned the possibility of having prblems getting our SPX Iron Condor off due to the abbreviated trading session today. As I suspected, that situation occurred so we will add the position Wednesday if the risk/reward scenario meets our requirements. The Jan08 expiration cycle is a bit tougher than most for adding Iron Condors because of the abbreviated sessions, and the two holidays that fall within the expiration cycle. The market prices the holidays in which causes the premiums to be a bit lower than normal.

The VIX has also moved towards the high 18’s from 26 last month. Due to this we will have to bring in our range a bit, most likely a 240-260 point range and possibly bring in a slightly lower credit. We do not want to push a trade through just to have a position in play. A 240 point range will requite the underlying SPX to move 8.1% up/down over the next 22 days before our position is in jeopardy and yet we should still be able to bring in roughly $.50 – $.70 or a percentage return of 4.5% to 8% over the next three and a half week. My guess is that we will have to bring in a lower credit for the expiration cycle due to all the aforementioned reasons stated above.

For those of you who observe the upcoming holiday, Merry Christmas and for those of you who do not have a wonderful day off! I will be back Wednesday.

Overbought/Oversold for December 24, 2007 

S&P (SPY) – 65.7 (neutral)

Russell 2000 (IWM) – 74.4  (overbought)

Dow (DIA) – 68.3 (neutral)

Nasdaq 100 (QQQQ) – 71.4 (overbought) 

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