Winner, Winner, Chicken Dinner

If you saw something on the wing you would be up 5.2%. CLICK HERE TO SEE WHAT I MEAN!

Today is the last day of Feb and spring is around the corner.

Volatility

Before we had this pull back I assumed that the VIX would fluctuate in the teens. I thought eventually we would start tracking the historic tendencies. But yesterday’s move suggested to me that the 20 level on the VIX is likely to be support and 28-30 is likely to be extreme resistance. That is how I will play the volatility going forward, low 20 long Vega, high 28-30 short Vega.

Yesterday’s post was about the overhead downtrend line that is now in place. To go a little further with that, for my opinion to change these criteria need to be met. First, I would like to see a close above the red channel line at the 1,115 level. Second, volumes would have to increase to over one billion positive up/down.

As far as trades go, I have been setting condors for April and I’m still setting credit spreads for March.

Bad News Bulls

The situation that we were in the last two weeks might be getting worse. We have failed to produce a higher high on the SPX, and with that I believe the bears will try to bring this market down. We did however produce a lower high at an over head resistance point, which makes me believe a reasonable target on the $SPX would be 1,010. But there is also another scenario on the table, which is a very choppy market between 1,115 and 1,085. I guess we will just have to wait to see how the market plays out.

SPX Filled

I got filled on my low prob condor about an hour ago and figured I should show it. Have a great weekend everyone!

Condor...SPX

If you have not heard the Fed raised the discount rate yesterday. They want to bring back regular monetary policy; I think this will be a one day event. But with this one day event volatilities are going to be higher and premiums are going to be juiced. I also think this volatility pop we get today will quickly get crushed back down next week, so today I will be selling Vega.

The plan is to sell a low probability condor, below is an idea of what I will be doing. As always I will keep you posted on my actually position.

2/18

Futures this morning are flat with some big economic news coming out this morning. Today we have jobless claims, PPI and our normal gas and petroleum reports.

The VIX is continuing its selloff, which is a good thing for premium sellers. I believe volatility will be more stable then the past two weeks, but I think we will stay above 20 on the VIX. The only thing that seems a bit over done is a market that goes straight up from the Feb lows. The SPX is up 5.5% the RUT is up 7.75% and the NDX is up 6%. I think we need a breather with some sideways actions, at least on the RUT, which is the only index above its 50 day moving average.

It’s almost condor season again for April, as for income trades I will be setting credit spreads next week for March. I gave up on my iron butterfly for March I never get the parameters I was looking for.

Good trading everyone!

There's Something On The Wing!

Going to set some credit spreads today, and wanted to share one that I liked.

SPX and Some Volatility

It really feels and looks like we have made a solid turn in the market, but we still have a few hurdles in our sights to get through. In my opinion we need to see a market that can make a higher high above the 1,150 level. If we cannot make it above that level we could be in the midst of a higher low short covering rally. If that is the case we will find resistance at the 50 day moving average on the $SPX. As we approach the 50 day moving average keep your eye on the $VIX for indication of any push higher in implied volatility.

Income trading this month was tougher than normal, and I had some trouble but nothing too bad. It’s not the last time the market and volatility go crazy while income trades are set. As for March trades I have set everything I could, except my normal iron butterfly position. Normally I look for certain criteria like probability of profit, price, standard deviation etc., but the SPX did not give me what I normally look for. I will give it 2 more days and if my criteria are not hit than I will skip that trade this month.

Thoughts

This morning the futures are pointing to a higher open, but I still believe lower prices are coming. There are a few things that could change my mind and one is if the NDX makes a higher high above the downtrend line that is in place. I would also like to see the SPX close above 1100, and IV to drop back below 20. I don’t expect these things to happen today, so I will be cautious until there is more clarity.

The VIX made a higher low and a higher high, which is not a good sign. I don’t want to see the VIX above 30, but if that happens I think we will head sub 1000 on the SPX.

I have most of my monthly trades set except a butterfly, my criteria have not been met, and until they do I will only manage what I have on.

Lower Prices to Come?

After Fridays candle I was feeling better about the market taking a breather, and possibly going higher. Well, I through that out the window with how today settled up, and my short term target is now the 200 day moving average. Short term resistance is 1070; today we came up and tagged the 1070 level in the S&P and then moved aggressively lower.

Trade Update

On Friday I did get my double diagonal set. Today I will be looking to set a butterfly, but only if the parameters are good. I also have one speculative trade on GLD, a broken wing butterfly. I will post that once I get a fill. And finally I will be setting a MNX calendar, good trading everyone.

Trading Emotions

Yesterday was a brutal day, panic and fear hit the street hard. Despite the emotions on the street I did not set any trade based on the move we had, not because of my emotions. Emotions are sometimes a hard thing to handle when things don’t work out the way you thought, or the thought of uncertainty is a main focus. Fighting the emotion fear is probably the hardest, because let’s face it we don’t want to be wrong. There is one thing that sets the men from the boys and that’s:

“The winners have attained a mind-set-a unique set of attitudes-that allows them to remain disciplined, focused, and, above all, confident in spite of the adverse conditions”

“Traders who make it beyond the threshold of consistency usually experience a great deal of pain both emotional and financial before they acquire the kind of attitude that allows them to functions effectively in the market environment”

Both of the quotes above come from a book that helped me through some emotional times when I first started trading. I over came my trading emotions, and so can you. I recommend "Trading in the Zone" by Mark Douglas. This book is full of inspiration and it will help if you are an emotional trader.

Today the big jobs number is coming out and it will move the market so be prepared for another rocky day if the number is not in line or better.

SPX

Below is an hourly chart of the $SPX, and I believe if we don't bounce from current levels we will see 1050 as our next support area. Currently the old low is acting as a support target.

Weak Open 2/4/2010

Today I will be busy setting and constructing my normal income trades. I will be focused on butterflies and I still have not filled a double diagonal, so I will be working both of those trades.

As for the market I think it all depends on the jobs number tomorrow, if the number is good you can expect the volatility levels to decrease. I have no prediction about the number tomorrow, but I will be watching it closely.

I will update any new trade that I set.

MNX Double Diagonal

New Trade Idea

I will be setting a trade like this sometime during the week.