HiPOS Weekly Update: Holding Steady in a Volatile Market

By Derek Moore

HiPOS Conservative Trade Update

The S&P 500 Index continued lower after the 3-day weekend but unrealized positions in the HiPOS Conservative strategy had positive gains for the day.

This is an example of time decay reducing premiums as we continue towards our September 16th expiration date, but also reflects the benefits of having sold premium on both sides of the market. Sometimes in short Iron Condor positions you flip around what you are rooting for depending on which side markets are running towards.

Currently the S&P 500 price level is 13% above the short put strike (out of the money), and 19% OTM from the short call strike.

Review of the HiPOS Graph Above

You’ll notice the two separate purple curved lines above and below the markets.

Levels which if broken, ZEGA’s traders may take a more defensive posture to further manage risk. As of the close, price is still a comfortable distance between those lines. With only 8 trading days left to expiration, those curves slope down (and up) to the right illustrating the positive effect of further time decay in the positions.

This should help positions in the strategy as we wind down towards September 16th.

What Are You Rooting For?

With short iron condors, you might start out wanting price to do one thing then change your mind and root the other way.

Early on you were wanting price to steady or go down but now you’d be just as happy if markets rise a bit. Some traders jokingly say you are never happy when you are short both sides. Keeping it simple, if markets don’t veer too far too fast in either direction, you’re ok with that. 

You also want days to tick by so less and less time value remains. 

We’ll keep it short and sweet today, but we’ll be back next week with another update.

As always don’t hesitate to reach out to ZEGA with questions on positions or if you are not currently using HiPOS Conservative, how it potentially fits into client’s asset allocations.