HiPOS Weekly Update: Volatility Recedes and Prices Rise
By Derek Moore
After what seemed like a one-day event, volatility has receded as the underlying markets move back to all-time highs. This price action has been favorable for our HiPOS conservative trade as it results in the distance widening between the current price and the short 2875 strike.
It also means that there is now some distance between price and our defensive purple curve line. This is an area where price moving below might result in ZEGA’s traders turning more defensive to further manage risk.
This was a welcome result as early in the trade it can help move things in the right direction. While price has been cooperating, so too has time decay. Each day that passes sees a little more of the time component in the options premiums being reduce.
Speaking of time, after today’s close there are only 15 more trading days left until the March 6th expiration day. Monday’s Presidents Day Holiday will see the US markets closed. In theory, we will also see some positive time decay over the holiday weekend.
We’ll keep this week’s edition on the shorter side. But rest assured, should anything develop we’ll be back with more updates. Until then, enjoy the long weekend.