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HiPOS Weekly Update: Right Place Right Time?

By Derek Moore

One of the cornerstones of our HiPOS strategy is the disciplined and systematic approach we take when choosing trades that qualify under our rigorous rules for entry. Regular readers know that often we wait until conditions are favorable. This might be a short-term spike in implied volatility as a market retraces.

Looking back at our entry on the graph above, we can see that our latest short credit spread wound up being placed adjacent to the most recent low on the market. Now, we also had our previous position just expire at a profit, but the heightened volatility in option premiums allowed us to get right back into a new position. As the article title alludes to, sometimes things line up and our previous expiration provided a nice entry window for the current trade.

With the underlying Nasdaq 100 Index moving higher since entry, it now sits a little over 19.5% above our short put strike. It also is above our purple curved line where our traders may increase our defensive posture. This is both a combination of the market moving higher but also a function of several days passing in the lifespan of our trade.

After today’s session there will only be 6 trading days remaining until expiration. As we previously mentioned it expires the morning of June 21st in what is called an opening rotation to determine the settlement value of the index.

Moving forward, and baring any large moves in the underlying Index, you and your clients may not see much change in the remaining value of the positions until expiration date. At this point you will be rooting for the days to tick by to get to the finish line.

We’ll be back next week with another update. Until then, enjoy the Father’s Day weekend!