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Well Traders, today was probably the last significant trading day of the year with many people beginning to start their holiday vacations. There will still be some trading, but my guess is that the volume will be light until the first week of January. Light volume can be a scary thing as less people can make pretty significant moves in the market, so be careful out there!
Today the $NDX fell another $7 points. More importantly, it tried to pierce the 30 Day Moving Average, but was unable to hold onto its advance keeping it below that resistance level for another day. Which begs the question, has the 30DMA now become a new level of resistance? Time will tell, but since it was such strong support for over 4 months, perhaps the roles are reversed? This will be important as we set up our next trade for February in a couple of weeks since I can't get the money I want to make a January trade worthwhile. Oh, I could move my Bear Call and Bull Put spreads closer to make up the money, but why risk it? Iron Condors are supposed to be very conservative, defensive plays since there is usually a poor risk/reward ratio. Now is not the time to be foolish and gamble.
We'll look at the next trade in the coming weeks, but in the meantime, I'll try to keep up with this blog every few days or so since I myself am going on vacation too.
Happy Holidays and Happy Trading!
Well Traders, today may have been a significant day. It is the first time since early August that the $NDX has fallen below the 30 Day Moving Average. That is a Bull run of over 4 months! Whew!
Here is the chart:
You'll notice that the $NDX touched the Bollinger Band support area (just above my gray "support area" at $1,761), then ended up higher than it opened, but still down almost $6 points for the day. So we are kind of at a crossroads in my humble opinion. The break below the 30 Day Moving Average is significant because it hasn't been here in a long time. It is now becoming more and more range-bound, bouncing between $1,761 and $1,824. If you wanted to play a tight Iron Condor (which I would never really recommend) you may think about it for January. Basically, you have to have solid conviction (and brass cajones) to think that those support and resistance levels would hold for a little over three weeks. If you played a tight $1850/$1875 Bear Call, you could make about $4.10, and a $1750/$1725 Bull Put may get you $6.40 for a total credit of $10.50. Your risk would only be $25.00 - 10.50 or $14.50. That is some serious bling if you have the guts to try it. Too risky for my blood.
I have not entered a January Iron Condor because my order wasn't filled today. I am only willing to make these plays for a certain ROI, and if I can't get that, Homey don't play. I'll try again tomorrow, but it looks like I may have to go back to my 6 week plays again in order to get the credit I want to make the play worthwhile.
Happy Trading!
(Click to enlarge, use the "Back" key to return to the blog.)
Well Traders, most of what we do when we create charts is estimate. With our own biases, we do our best to see what the chart is showing us, and somehow put that into an analysis that makes sense to us. Sometimes we see things that just aren't there, or we see things we hope are there. in any case, it is always an inexact science.
Today, I see what may be a "Double Top" formation, albeit a weak one. I have circled the two "tops" in orange to highlight them. The formation, if valid would indicate that an absolute top (for the time being) has been reached and that the market will fall off from here. That may or may-not occur, but again, charting is an inexact science.
As you see, the $NDX is becoming somewhat range-bound, which for an Iron Condor is a beautiful thing...assuming it remains range-bound. Since the range is in such a tight timeframe, I am very hesitant to use it ($1,824 - $1,761) at this time until more time elapses and the undex continues to be rangebound. Even then, you still always play smart.
I have not placed a January trade yet; still waiting on some feedback from my mentors regarding this play. You will see the highlighted areas in which I name my Bear Call and Bull Put spreads for the trade. Right now, it doesn't look like it would make much money, but an Iron Condor isn't supposed to at first. When played correctly, it is a way to make some decent income without the risk of say, a directional option. That being said, the narrower a trading range, the more profitable an Iron Condor can be, so I would LOVE to see a fairly tight and predictable range develop here for a few months. By March/April, I am sure the "Sell in May and go away" clause will initiate and I may look at only Bear Calls to take advantage of a usualy predictable pre-summer falling market.
Happy Trading!
Well Traders, looks like I may be in a bit of a quandry with my January Iron Condor. Today's big $20 point run-up was somewhat unexpected, though not totally. I suspected some breakout was close based on the Bollinger Bands squeezing. Couple that with a Bullish 30 day Moving Average and odds were, there would be a Bullish breakout possible. While it isn't a full-blown breakout, it did cause me to re-think my January play.
Here is the $NDX chart:
As you see, the diagonal resistance (formerly diagonal support on the Ascending Channel) is still holding. However, with the big run-up today, and the usual 4th quarter rally seemingly heating up again, I have decided to use the median line of the Ascending Channel designate my Bear Call spread at $1925/$1950. I have three resistances going for me at this time. The first is the aforementioned diagonal resistance line. The second is the previous high at $1824, which has only been tested once, so it isn't really strong resistance at this point. The third and final resistance is the Median line in the Ascending Channel, which does intersect the Expiration Date line at $1931 making it a little higher than the $1925 Short in my Bear Call. Call it a calculated risk.
For the Bull Put, things were a little easier. I chose a Bull Put at $1625/$1600. There are three supports protecting it: the first at $1761-$1750, a previous strong resistance (now considered strong support), the second support is at $1695, and third, there is very strong support at $1630 (trust me, you'll see it on a one-year chart).
I could have also gone Uber-conservative on the Bear Call by playing a $1975/$2000 spread, but there is no money in it. I could also choose a $1950/$1975 Bear Call, which would place it above the Median line intersect, but again, there is no money in it. The key is to find some balance of risk to reward that makes the trade worthwhile without being too risky. Remember, I have had to roll-out the last two months, and I'd like to get into plays where that isn't necessary. I hope this is my first one to accomplish that.
Tomorrow, I'll share the analysis sheet I created on EXCEL to show you the trade layout.
Happy Trading!
Well Traders, no need for a chart today. The $NDX barely moved which leaves my December Iron Condor in a Golden position. Tomorrow, I should be able to have my positions closed out at 4:15 PM and save on commissions.
Tomorrow, I'll show you my January Iron Condor trade.
Happy Trading!
Well Traders, only two more full trading days for my December Iron Condor trade and at this point, it looks like we have a winner! The $NDX was down almost $10 points today ending at $1,782, well below my Bear Call spread of $1,850/$1,875, and really, really far above my Bull Put spread. So, with my values down to $0.15, $0.10, and $0.05, it looks like I'll be able to let my trade close at 4:15 PM Thursday, and save myself some commission payments since CyberTrader doesn't charge them if the option expire. Nice way to save a little extra cash!
It is time to start setting up January's trade. Here is my chart:
You'll see that I have projected the chart out to January's Expiration Date so I can estimate potential movement, and target strikes. Using the Ascending Channel (which the index has broken out of), I have three (3) lines. The lowest is the AC support line, which is now acting as resistance. If I use this line, and assume the $NDX will not be able to break above it by the ED, then you can see that it intersects the ED vertical line at about $1,895. This would mean I could set a $1,900/$1,925 Bear Call, or to be a little safer, a $1,925/$1950.
If I use the middle (Median) line of the AC, we can see that it intersects the January ED at about $1,931. This means I could be a little daring and use a $1,925/$1,950 Bear Call spread, or to be a bit safer, use a $1,950/$1,975 spread instead.
Finally, if I use the top line of the AC, then we see that it intersects the January ED line at about $1,965. Again, to be daring we could use a $1,950/$1,975 spread, or a $1,975/$2,000 spread to be safer. This would be the Uber-conservative approach since the $NDX is already out of the AC, and using the upper line would virtually assure a winning trade. (Note the operative word "virtually," since nothing is guaranteed in the market...nothing...ever!)
It will come down to risk/reward and what the Iron Condor will be worth when I enter the trade. Remember, we don't want to have to do anything after we enter, so the wider the spreads, the better chance we won't have to do anything. I have had to roll my last two trades (both were profitable) the last two months due to the strength in the market, but with the recent breakdown out of the Asecending Channel, the $NDX may be cooling off a bit. Of course, taking less risk yields less reward too...so we have to find a nice balance. The next two days wil tell me a lot about where I need to place my trade for January.
Happy Trading!
Well Traders, we are coming down to the wire on my December Iron Condor and things are looking good so far. Most of the value in my trade is gone, and with only three full trading days left, and a full $57 points from my Bear Call, it would take some HUGE days to break this trade. That is never out of the realm of possibilities, but let's hope it doesn't happen here.
As you will see from the chart above, the $NDX rallied up to the Ascending Channel support line, but was unable to break through...again. The previous support line is acting as resistance now and if it continues to do this for the next three days, my trade will be golden!
The Time Value left in this trade is down to next to nothing. The highest amount left on the board is $0.40 on my Bear Call. The others are $0.15, $0.10 and $0.00. Basically, I am at a point that if I get no serious run-up the next few days, I'll let the trade expire on Friday, and maximize the profits left over after the roll-out.
Time to start looking at January's trade.
Happy Trading!
Well Traders, the $NDX tried to make a nice rally today reaching $20 points higher after a lower open, then fell off in late afternoon trading to finish up only $8.75 for the day. What does that mean for my trade? Well, if you look at the chart above (remember to click on it once or twice to enlarge it, then use the "back" key to return to the blog), you'll see that the index tried to break back into the Ascending Channel, was able to do it momentarily, but was unable to remain there for the day. This may mean that the previous lower support for the Asecending Channel now becomes resistance, which would be wonderful for my December Iron Condor.
If you look on the chart, if the lower support of the AC does indeed remain as resistance, then it will effectively block the $NDX from breaking into my Bear Call, and my trade will be profitable next Friday morning. According to my projections, the AC will keep the $NDX to no more than about $1,815-$1,820, which is all I need since my Bear Call is an $1,850/$1,875 spread.
As it is already, the value on the $1,850 Short has diminished from $7.20 to only $0.85, meaning on Monday, time value will really begin burning off fast unless there is a HUGE run-up (which is always a possibility).
As for next week, it will be time to start planning the January Iron Condor, or maybe just a one-sided spread depending on what the chart and projections are telling me. The January IC will be executed on Friday as part of my shortened time strategy. I am also doing this because it gets VERY confusing looking at two Iron Condor trades on CyberTrader at the same time. I'll play more contracts for less time.
Have a great weekend and Happy Trading!
Well Traders, "It's A Beautiful Day," as the $NDX confirmed my suggested weakness yesterday and took a nice $21 point dip. The index is now at $1,777, almost $75 points from my Bear Call spread...nice!
By looking at the STO, it looks like a downward decent has started and we may see a couple of more down days on the Index. Couple this with Options Week next week, which is usually Bearish, and it looks like my Decemeber Iron Condor may pass the smell test. We'll have to wait and see.
Notice how the Index has fallen through the Ascending Channel? A fall below $1,761, and then through $1,750 would indicate that a peak was achieved, and we may be looking Bearish for awhile. This will help my January set-up greatly. But before we get too giddy about that, we need to see how $1,760 acts as support...it bounced here last time on both 11/28 and 12/1.
Happy Trading!
Well Traders, I just wanted to check in on a friend's $SPX trade to see how he was doing with it. So far, it looks like it will be a solid trade. You'll notice from the chart above that the index is trading at the upper part of the Bollinger Band and that the STO is in Overbought territory giving a good indication that the index should begin to move lower the next few days.
The Ascending Channel indicates that the trade could break through his Bear Call spread, but at this point, with this little time left, I don't necessarily see that happening. With only 6 more market days for the trade, at this point I have to think that this will work out as planned, and that maximum profits will be taken. Good job!
Happy Trading!
Well Traders, my friend Dave D. pointed out an important mistake I made with my December Iron Condor analysis that actually works in my favor. It was my understanding that the $NDX option expired the opening tick on the Friday after the third Thursday, which would put the December trade expiring on December 21. Dave D. pointed out that the Expiration Date was the 15th because the actual Expiration Date of the $NDX is the "opening tick of the third Friday of the month", which makes it 12/15.
This is important because it cuts off a week of time value from my trade, accelerating the TV burn-off, and enhancing the probability of the profitability of this trade.
Here is the graph with both the new Expiration Date line at 12/15, and the old one at 12/21. You'll see that the trade looks much better now and assuming there is no wild outbreak on the $NDX, I am feeling much better about this.
Thanks again Dave D. & Happy Trading!
Well Traders, a good day for me. The $NDX was down a little over $5 points which is good for my December Iron Condor. Today's candlestick formation was another "spinning top" indicating that there is indecision. The fact that this was a lower spinning top than yesterday, and with the STO getting closer to the Overbought zone, seems to indicate to me that the index is losing some strength.
That being said, technically speaking, the $NDX is still trading within its Ascending Channel, so there is NOT a trend reversal at this point. The fact that the index is at the support level of the channel may indicate a run-up may occur. Of course, I am hoping the run-up party is over and it falls back towards $1760 or lower. Time will tell.
Happy Trading!
Well Traders, even though the $NDX was up almost $5 points, the "spinning top" candle formation may indicate some indecision.
There has been a slew of bad news recently and perhaps some of it is starting to sink in? Technically speaking, I expect the $NDX to continue upward until the STO and MACD tell me different. How much, and how fast remains to be seen.
Time is not on my side yet, and I could really use another good down day to maybe check out early, or at least give me some breathing room with over two weeks left until expiration. That break may come next week, which is options week, and is typically a down time in the market. We'll have to wait and see what happens.
Happy Trading!
Well Traders, the $NDX is acting just like clockwork. As you remember on Friday, the index fell to the $1761 support level (after breaking diagonal support) and rebounded with a furious rally at the end of the day to maintain the diagonal support. The STO and MACD were indicating an upturn and low and behold, that is exactly what we got! This is one of the most beautiful Ascending Channel charts since it just stays withing the range and bounces merrily along inside.
This also worries me.
As you will note, the December 21 Expiration Date looks like my $1850 strike price may not hold, meaning this will not be a successful trade. Even the bad economic news on Friday and with Pfizer's news on the Dow today (which was also up huge) hasn't been enough to temper this very hot market. I could certainly use a nice big down day, but technically speaking, it looks like a few more days of sweating an uptrend before we see another pullback. A few more $25 up days and I'll be singing the holiday blues!
Happy Trading!
Well Traders, a very interesting Friday on the $NDX. The index actually broke my diagonal support line intraday, before a furious rally in the last 90 minutes to close just at the diagonal support line. The $NDX actually hit about $1761, which is the top of my "support area" shaed in gray.
What does it all mean?
Well, this could be the start of a softening of the $NDX, though I would have liked to have seen the index remain below the diagonal support line at the close for more conviction. Still, there is the "support area" to contend with. As long as the $NDX remains above this area, there is still the possibility of a run-up.
At this time my trade is just about even, after the roll-out. This weekend helped to cut out some time value, and another down day on Monday will help greatly. My Bull Put spread is getting nearly worthless, whihc means I have just about maximized the profits on the bottom.
A continuation of a downtrend through the "support area" would be ideal, as it will enable me to set up my January trade in a few weeks.
On a down note, my beloved Alma Mater, USC lost an improbable game 13-9 to upset-minded and cross-town rival, UCLA, whose defense played an inspired game, snapping the Trojans' NCAA-record of scoring 20 points a game at 63. Congrats to the Bruins!
Happy Trading!
