We will cautiously enter a new position later today, as long as SPX remains within the guidelines.
As of this writing, futures are relatively quiet; ES is +3.50. However, there is an ECB press conference at 8:30 am EST, which could bring some volatility to the open. I am planning to enter a new position today, but at this point I would recommend waiting until the afternoon before entering. There have been many days recently where we have seen a sudden move in the afternoon, and by waiting we may eliminate some of that risk.
This week's entry is for the August monthly cycle, which expires on August 16. The Option Code is SPX140816.
Trade entry details will be posted when the position is opened.
For the benefit of new subscribers, I am re-publishing the guidelines for the weekly Iron Condor.
The basic guidelines for this trade are:
Entry Day: Thursday or Friday for the next week's expiration cycle. As with our other weekly and monthly strategies, if SPX has moved +/- more than a one day, one standard deviation move, do not enter the trade until the movement is less than a standard deviation. If it remains over a one day standard deviation, do not enter the trade. As of this writing, the one-day, one standard deviation move is approximately 16 points. If a significant market move prevents entry by Friday, a Monday entry will be considered as long as there is sufficient credit.
Time of entry: Exact time is trader's choice; wait at least the first hour after the open before entering.
Trade entry: Sell short Call and short Put with delta of approximately .10 - .12. Buy long call and long put 10 points above and below short strikes.
Minimum Credit: Credit must be at least $1.25 to enter the trade.
Maximum Risk/Margin: Width of wings less credit received. Using the example of the minimum credit of $1.25, the maximum risk would be $875 ($1,000 less $125).
This strategy is intended to be a "no touch" strategy; keeping the position open until target gain is reached. The trade will be closed if the pre-set max loss is reached, or if SPX reaches either short strike. If there is significant economic or geo-political news that may adversely affect the position during the week, it is recommended to exit in advance of the news.
Target gain: 7% of margin/risk. Using the same example of $1.25 credit, the target gain would be 7% of $875 or $61.25.
Max loss: 10% of margin/risk ($87.50 based on $1.25 credit).
Having said that, it is a traderâ€™s individual decision whether to wait for target gain, or max loss, on any position. Trading is a blend of oneâ€™s individual style, risk tolerance, and intuition. This combination can help reach your annual trade plan results. I recommend following your own trade style; there is nothing wrong with exiting a position early. Remember with weekly trades, there are 52 opportunities in a year to trade so it is important to be comfortable with your trade size and position. Remember, trading is an art, not a science.
As always, stay keen on your risk management and trade carefully,