INDEX VOLATILITY REMAINS RELATIVELY HIGH -- WEEKLY INDEX TRADES
The volatility in the index ETF's remains relatively high with QQQ topping the bunch at 84 IVR (6 Month Dough), followed by IWM (77), DIA (64), and SPY (53).
Ordinarily, it is my habit to put on one index-based trade a week, assuming that sufficient volatility is there to make premium selling worthwhile (i.e., IVR >35). I like to look at expiries that are around 45 days out and set them up in as delta neutral a fashion as possible. Because the call side tends to be thin, I have been placing the short call strike at or slightly above the expected move for the expiry, the long call strike 3 strikes out from that. I then use an approximately delta-equal short put strike to the short call strike and then place the long put strike 3 strikes out from that. This results is a fairly delta neutral, bearishly skewed iron condor.
Here are two possibilities:
IWM Sep 25 105/108/125/128 IC for .68 credit
QQQ Sep 25 99/102/114.5/117.5 IC for .77 credit
I attempted to fashion delta-neutral IC's in SPY and DIA, but the short put strikes for the Sep 25 expiry are not yet ideal for that.
Notes: I have probably mentioned this numerous times, but note that I am using IVR (IV rank) as an indicator of when I should go for a premium selling setup in an index, as opposed to using just plain IV. IV in most ETF's is usually fairly low. For example, the IV in SPY has been between 12.5 and 20 for the past 90 days. IVR measures how high the current IV is given the historic IV for that particular underlying. An IVR of 100 for SPY would indicate that SPY is at the top end of the range of historic volatility; an IVR of 0 for SPY would indicate that it's at the low end of its volatility.
Generally, I look to take off IC's at 50% max profit. Although you can naturally wait until expiry, I prefer to lock in gains as they occur and then redeploy the buying power for setups with later expiries.
Ordinarily, it is my habit to put on one index-based trade a week, assuming that sufficient volatility is there to make premium selling worthwhile (i.e., IVR >35). I like to look at expiries that are around 45 days out and set them up in as delta neutral a fashion as possible. Because the call side tends to be thin, I have been placing the short call strike at or slightly above the expected move for the expiry, the long call strike 3 strikes out from that. I then use an approximately delta-equal short put strike to the short call strike and then place the long put strike 3 strikes out from that. This results is a fairly delta neutral, bearishly skewed iron condor.
Here are two possibilities:
IWM Sep 25 105/108/125/128 IC for .68 credit
QQQ Sep 25 99/102/114.5/117.5 IC for .77 credit
I attempted to fashion delta-neutral IC's in SPY and DIA, but the short put strikes for the Sep 25 expiry are not yet ideal for that.
Notes: I have probably mentioned this numerous times, but note that I am using IVR (IV rank) as an indicator of when I should go for a premium selling setup in an index, as opposed to using just plain IV. IV in most ETF's is usually fairly low. For example, the IV in SPY has been between 12.5 and 20 for the past 90 days. IVR measures how high the current IV is given the historic IV for that particular underlying. An IVR of 100 for SPY would indicate that SPY is at the top end of the range of historic volatility; an IVR of 0 for SPY would indicate that it's at the low end of its volatility.
Generally, I look to take off IC's at 50% max profit. Although you can naturally wait until expiry, I prefer to lock in gains as they occur and then redeploy the buying power for setups with later expiries.