July 21, 2017

Range bound trading persists. Our condors should benefit greatly as a result.

Range -bound trading persists in this market and by the look of it we should expect more of the same going forward. The indices we follow are firmly situated in a neutral state. My hope was that we could see the market, more specifically the S&P, move into an overbought state. We were close to hitting that point today, but the 50-day moving average once again acted as a strong area of support.  

The range is slowly being established and I expect as the summer progresses there will be some wonderful opportunities to fade range extremes. I will discuss in further detail tomorrow.

In regards to our SPX Short Iron Condor strategy we should be in very good shape next week with the recent market sell-off. I stated last week that “the July Expiration cycle, it is a five week cycle, so we have decided not to establish a position next week as we prefer to only go out a maximum of four weeks. This could prove to be advantageous if the market does indeed move lower next week as a move lower will increase the VIX (volatility measure) and will allow us to bring in more premium. We are perfectly happy with gains ranging from 6-10% over the course of four weeks.”

The VIX is now above 14%, which if it holds, should bode well for the condor strategy. Typically the higher the VIX the higher the premium. The higher the premium the higher the return. Hopefully, we see 15% by the time we place our trade Monday.

Overbought/Oversold levels for June 21, 2007

     

  • SPY –  50.9 (neutral)
  • DIA – 52.0 (neutral)
  • IWM – 50.4 (neutral)
  • QQQQ – 62.8 (neutral)
  • GLD – 40.0 (neutral)
  • OIH – 66.4 – (neutral)

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