Today is Options Expiration day for the $NDX, and although I am already out of my November Iron Condor (for a profit), I think it is vital to review the play and see what I could have done better.
Here is today's chart:
As you can see from the analysis (click to enlarge it, sometimes twice, then use your "back" button to return to the Blog), the index is moving perfectly in the Ascending Channel. Now, I chose to use a strict numerical distance based on the index price on my start date (250 points, 125 up, 125 down) to place my trade. Quite frankly, I felt 125 points would be sufficient (it wasn't) for a successful play. Upon reflection, had I used the channel as a guide, I would have seen the $1,850/$1,875 Bear Call should be safe for the top based on the channel and the expiration date. I was counting on very strong resistance at $1,750 and $1,761 based on previous, unsuccessful attempts to break through. Unfortunately my resistance points did not hold, so that threw my trade a wrinkle.For January's trade, I will be more diligent to pay attention to what the technical analysis is telling me, then see if the trade is worth it. If the market is still this "hot," it may be worthwhile to wait for it to consolidate into a trading range which is more easily defined, then place an Iron Condor trade. If I am looking at $350-$400 point spreads because the market is uptrending so strong, perhaps that is NOT the time to be in Iron Condors? Maybe I need to say, "If I can't make $3,500 safely with less than a $300 point spread (i.e. technically showing the spreads are "safe" based on support and resistance, channels, etc.), then perhaps I should be looking elsewhere to invest?"
Happy Trading!
1 comment:
Update on my SPX Iron Condor.
It expired yesterday in the money with both sides expiring worthless for the maximum profit.
I constructed it by using the maximum movement the SPX had made in the last year. I set my outside parameters just beyond the maximum spread during the year. THis was not as profitable as it could have been with a narrower spread, but it was statistically 100% sure to close. As it turned out, the index closed within a few point of the exact middle of my spread.
I wish I could claim I was that good, but luck pays just as well in this case!
I am using the same technique on the 3 major indexes, those trades will be placed in the next few days. I wanted to see if they were going to blow past the upper channels they have pretty much all formed or turn back. Today it looks like they will pause for a minute, the indexes are not very decisive as I am writing this.
When I finish my analysis and set my trade I will be happy to share with everybody!
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