The roller coaster ride continues; too risky for short term trades such as the SPX Weekly Iron Condor.
Yesterday was "more of the same" with wild intra-day volatility, this time caused by the ECB interest rate decision and subsequent press conference by Mario Draghi. While the day ended up closing basically flat from Wednesday's close at 1990, SPX had a 36 point range between the high and lows of the day.
As of this writing futures are up about 19 points, so we could see a break above resistance heading into the weekend. The trade guidelines for the SPX Weekly Iron Condor call for "NO ENTRY" if SPX has moved up or down more than a one-day standard deviation, which is currently 17 points.
There are a few other factors adding to the risk for a new trade entry today:
- This weekly cycle is the regular monthly cycle; the bid/ask can be wider than normal making it difficult to gauge a decent credit for a new trade entry.
- All eyes are on the FOMC meeting next week and the subsequent announcement/press conference on Wednesday. Any new, short term trade being considered for entry today would have to be exited before Wednesday.
- Because of the FOMC meeting next week, the market makers will likely keep volatility levels elevated heading into the announcement, making it further difficult to attain target gain before the announcement.
SPX 6 month chart
Even if the market settles back to within a one-day standard deviation, this is one of those weeks where I feel it is better to hold cash as our position rather than risk a new short term trade entry. To quote Tom Hughes in last night's Market Wrap: " The bounce may continue higher but I think the next few days are better for watching the market, and waiting for signals, than entering new positions.
In summary, I am not recommending a new trade entry today for the SPX Weekly Iron Condor. There is too much risk on either side to put live capital at stake, so we will sit on the sidelines with our cash and see if the market settles after the FOMC meeting next week.
As always, stay keen on your risk management and trade carefully,