#SPX1dte Another day, another stop. Been doing a lot of thinking this week and realized that whatever has caused the change in SPX option chain does not matter. It has changed. At least for now. The distance between .06 deltas for the next day is consistently under 100 and sometimes under 90. This stands in contrast to the 1st quarter this year, during a prolonged upside warning, where the distance stayed above 120 even on calm days.
The $VIX spent that quarter mostly between 17 and 23. This week we have been drifting to 3-year lows even as we head for a down week. This is likely the reason for the tight range, and it hopefully can widen again after we go through a small (or big) correction.
Until then, the last two weeks demonstrate that going LONG on these condors is the more profitable approach. On the traditional #SPX1dte short daily condors, stops were hit on 7 out of the 9 trading days. I could have easily made 2.00 on each one of those days, by buying a condor for about -1.00 and selling one side for at least +3.00. It’s a much tougher strategy to manage however, as selling for 3.00 may remove the chance to sell for more, or even ending day fully ITM for 19.00 profit, which could have been the case last Thursday. But of course, waiting for those types of windfalls risks losing all profit.
This is a tough switch to make. I tried it last summer, but as soon as I switched the market calmed to the point that I had to switch back to short. I stayed with the short strategy ever since. So if I make this switch, it may be short lived; I can wait for widths to return to 105 points or more consistently. Or I may switch between them on a daily basis, based on conditions.
Options Bistro 