Winding Down...

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!