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HiPOS Weekly Update: Helpful Move in the S&P 500 Index

By Derek Moore

With today’s market surge, the HiPOS position that expires on May 29th, benefited as it expanded its distance out of the money from the 2225 strike. Looking at the chart above, you can see that the close today in the market was higher than the range going all the way back to March. The HiPOS spread also benefited from the reduction in implied volatility as well as the time decay from the passage of one day.

With 8 trading days left until expiration, for those of you rooting at home, this is exactly the type of market action you could have wanted. Eight days in the market can still see dramatic moves so we will of course provide updates on the trade towards the beginning of next week.

What About Selling Call Spreads for an Iron Condor?

Some advisors have already brought up the idea of legging into an Iron Condor position. This would involve instituting an additional short call spread above the market to pair with our existing short put spread below the market. While the market has moved higher, the challenge is the number of days left relative to the available premium available. As of today’s price action, the new position would have to be just too close to make the trade worth it compared to the additional risk, but it’s not entirely out of the question just yet.

That said, should this trade expire worthless, our traders will, as always, be looking at both sides of the spectrum.

The Road Ahead

For now, you will look for time to expiration to get shorter and shorter as the days tick off. Keep in mind the market will be closed next Monday, Memorial Day. You also want the market to just not quickly make an out-sized downside move towards the short strike price.