Gold can be a tricky market to trade. It gaps all over the place for seemingly no reason. Applying normal technical analysis can be tricky too. This is one of those underlying market themes – you just have to “pick your spot.”
We have been playing the range in crude oil as of late, but, here, I am not playing the top or the bottom of the channel or anything like that. I am essentially taking the stance that “I don’t know where we are going, but we ain’t staying here!” Take a look at what I mean with this chart.
This is what’s known in technical parlance as “no-man’s land!” I think one of two things is likely to happen. Either the shorts are going to win out and defend this big move up or they are going to get squeezed and squeezed hard.
The Trade
As I said earlier, we ain’t staying here. So, in a situation like this, I am thinking two things – iron condor or iron fly.
We see that if we give ourselves a May timeframe, using the implied volatility, we get a one-standard deviation range of $111.41 to $122.65. The 112 put/115 put/119 call/122 call iron condor is trading $1.50.
Note: One thing that is for sure is there have never been more speculative shorts than right now.
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