Yo Pit Crazies,
For me, a big part of the Option Pit value proposition is that we follow our positions to the end and work out exit strategies beforehand.
That way, come what may, the plan is in place and I can let the market play and make its move.
Or it’s non-move.
Yesterday the SPDR S&P 500 ETF (Ticker: SPY) was all over the place. I saw a massive daily range over 100% volatility … only to finish down .05% on the day.
I would say the market is still unsettled, meaning it moved a ton intraday and but not much by the end of the day.
This had implications for positions I had running. (And for current positions, too, as in will the market still be super volatile intraday?)
Did I do the right thing closing my trade?
When in Doubt, Close the Trade
I posted an Iron Condor to OP Mentoring last Wednesday and, to my surprise, IV went straight up afterwards.
I picked the March 17 cycle in SPY, so I figured that It would be less sensitive to the IV move in case the CPI was a big deal.
That turned out to be correct, but traders were pricing in a huge move by Monday in the very short-term options.
I did not expect that. Why? As we have said over and over, the Fed sticking to the raising plan was a foregone conclusion. In this case it did not matter, as traders bid up this week’s option prices and got a massive intraday move, just not a big close to close move.
I had some doubt going into the number, and with the trade up a bit (3%), I figured it was better to close.
When there is doubt … close!
I can always put the trade on again.
Overall, the market feels directionless, but trending up, if anything.
That is a good condition for a Flat Delta Iron Condor.
To Your Trading Success,
AG