When you can have something, you don’t want it.  When you want something, you can’t have it. 

That is often the case with option spreads, especially those from the credit side.  The proposition of selling option premium is great.  Sell it, forget about it and collect your check at expiration.

Here’s the catch

The problem tends to be that when it makes sense to sell premium (expecting little or no movement), IV is so slow that the odds that you have to lay makes it prohibitive.  When you want to buy premium (an expectation of a move), IV is so high you have very little chance of making any discernible profits.  You have to be savvy with these types of setups.  Take a look at the set up in Las Vegas Sands (LVS). 

ShorrMay29.jpg

You can see from the horizontal line I have drawn is that we have huge support at the 49.75 level.  I was able to sell the 5/29 (weekly) 49.5/50.5/51.5/52.5 Iron Condor for $0.50. LVS was trading $50.30 at the time and at the time of this writing it was trading 49.86. 

Key points

Let’s just say that I liked the trade a lot more up at $50.50 than I do now, but I am leaning on at least two things. 

One, the huge support line is defining a huge “fight” that may be a temporary bottom

Two, my risk is defined.  I know that I cannot lose more than $0.50 on this play.  Can it continue down?  It certainly can.  Can it just sit?  It certainly can.  Very rarely can you have you cake and eat it too.  This is a pretty good bet on getting both!