Rinse ‘n’ Repeat in the Chop

As a new week approaches, I am certainly excited that quarterly expiration week is done and over with. Like it tends to be, last week was nothing but chop, and the iron condor we opened on Monday was perfect for taking advantage of the messy price action.

While I would personally love to see the market show signs of momentum this coming week, please keep in mind that just because quarterly expiration is over it doesn’t mean the market can’t continue to chop. So while there is the potential that we see the markets get back to business and grinding higher on momentum, there is also the potential for a repeat of last week’s sideways action. With this being said, I plan to hold on tight to our current open long positions, and would actually like to sell another iron condor on SPX to take advantage of any potential chop.


Just like last week, I will look to sell an $SPX iron condor for this coming Friday’s expiration and would like to obtain a 4-1 risk:reward ratio or better. As for a strike selection, ideally I would like to have our short strikes on the put side under the 50 SMA, and on the call side I would like our short strikes above the previous all-time high and above the psychological level of $4000.

Based on the structure of the market and the pullback that we’ve seen from $VIX, I don’t think the market will roll over this week, though of course it is always possible. On the flipside, should the market rally to a brand new all-time high by Friday, we may end up taking a loss on the iron condor, but that should be more than offset by the positive gains our long positions would bring in. I love opening iron condor‘s with this mindset. If we do nothing but chop, we will bring in some nice weekly income. If the market explodes higher, our long positions should be thriving and moving our equity curve higher.

As for the management of the iron condor, a reminder from my experience last week; take the 70% of max profit and run!!!

 Keep in mind, we have a lot of Fed-Talk this week, and that typically can result in a choppy environment. Just like last week, chasing intraday directional moves may prove to be difficult, and the Iron Condor might once again be the go-to trade!