Trade Alert: Sell An Iron Condor Before Memorial Day

The market certainly exhibited some volatility last week and seems like everyone wants to take a bit of a breather.  Another thing to keep in mind is that we have the Memorial Day holiday coming up on Monday.  When you have a holiday like Memorial Day it tend to act like a double day off as traders tend to take off early on Friday if nothing happens immediately off the open.  They get to beat the traffic on their way out to the Hamptons.  Armed with this bias, we are looking to sell an Iron Condor on the S&P ETF, SPY.  At the time of this writing, SPY is trading $205.50.  Through next Friday the market is pricing in approximately a $4 move up or down.  In addition to having a sideways bias, it is also our feeling that this is not an environment where stocks are set to take out recent highs.  So, we propose an asymmetrical Iron Condor:

5-23-16:  Based on our methodology a signal has been generated:

Buy (opening) the SPY June 3rd WE 200 strike put
Sell (opening) the SPY June 3rd WE 201 strike put
Sell (opening) the SPY June 3rd We 207 strike call 
Buy (opening) the SPY June 3rd WE 208 strike call

For a CREDIT of $0.50 or more.  

This signal is not GTC and is valid with SPY trading $205.25 - $206.


Here’s the chart.  I have drawn the breakeven points in red:




So, we lay even money to say that the SPY will not take out the recent highs from mid May and we have a full standard deviation move protected to the downside and we “steal” and extra day or two in decay due to the Holiday.  Not too bad for a grind away beginning of the summer.





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