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HiPOS Weekly Update: Keeping It Between the Uprights

By Derek Moore

Last night the new NFL football season kicked off with the rest of week 1’s opening games this weekend. Those familiar with football know that you want your field goal kicker (to score three points or extra point after touchdowns) to kick the ball far enough to reach the uprights. Of course, it also must be accurate and no better outcome then right between the field goal posts.

With this current HiPOS trade, the market currently is just about between the uprights where the S&P 500 Index in the graph above is nicely in the middle of our two short strike prices. As you might remember what started out as just a short call spread above the market morphed into an iron condor when we added the short put spread below the market. You want the market to stay far away from each and that is what the result thus far has been.

After today’s market action there will only be 1 week remaining until expiration day next Friday September 18th. When you have short volatility trades on both sides of the market time decay is positively increased as the time value of the options comes out nearer to expiration on both sides of the market.

This is a good example of how time passing, and the position or level of the underlying index are what drives positive movement of the positions. With 1 week to go you and you clients would not expect too much movement in the value of the spreads unless the market should decide to move in a volatile fashion higher or lower from here.

One question I thought I would address that we sometimes receive from advisors is whether new money brought into the strategy needs to sit idle until the primary trade we write about expires? The quick answer is no. If money comes in and a trade qualifies our traders can establish new positions or join the existing ones.

Until next week enjoy the upcoming slate of full NFL games, and most of the college football offerings. We’ll check in next week with another update.