HiPOS Weekly Update: Splitting the Difference in the S&P 500

With a week to go in our short Iron Condor position, the market has been cooperating as price has stayed in between both the strike prices and both purple curved lines. While as of late trading Friday afternoon, the S&P 500 Index is sitting about 10% below the 3400 short call strike while 27% above the short-put strike.

This type of market activity thus far has been just fine for the current construct of the trade. We are also seeing time decay start to kick in as we get closer to next Friday’s expiration date. One quick note on time decay, some of you might have noticed that the remaining value of the spread had not budged as much as you might think as the days ticked off. The reason for that included a surge in the level of volatility shown in the VIX Index as well as a more complicated likely positioning of trading books.

When option positions are put on, often the dealers or market makers hedge those positions. Their positions on the books can impact pricing in the options market. Since I am going to keep this update brief, I will leave that subject for another time.

So, what should you be rooting for in this final week? More of the same where the price of the underlying index just kind of hangs around and splits the difference between the short call and short put strike prices. Of course the market can move around a bit in either direction provided it does not move to sharply too quickly in either direction. As we get closer to expiration you most likely will not see that much movement in the value until both legs expire worthless or at zero. This is what you want to realize a full profit.

Should anything change we of course will be back with an update. Until then, Happy Father’s Day Weekend!