Just a quick note today before I enter into a trade we can follow.
1. I think premium sellers will be very happy if they were willing to unload a condor on Friday mid-day. It was a clear example where a low probability condor was going to outperform a butterfly. This was mostly due to the fact that traders wanted to get into a 'pure Vega' play as opposed to selling gamma.
2. Traders that did not sell the high probability condors might consider skipping it at this point. I am not sure there is enough premium, and the wing skew is so low that the condors appear to be very tight. If I am trading a low yield trade it better be safe, condors do not look all that safe-relative to the risk.
3. For traders that did not jump in Friday, I would be looking at double diagonals, diagonal butterflies (straddle strangle swaps), or butterflies. It looks like the market may be throwing on the holiday crush early and often this year. I am going to be looking to jump in on my butterflies a little early than normal with the hope of Christmas being priced out a week ahead of time.
4. The XLV trade is actually making money
5. Once the crush is out that may be a great time to put calendars on. I am guessing that February will be over sold at some point in late December…..at least for a day or two.
I have received several questions. I am going to be doing a mailbag on Friday. If you have a question that you want answers to, please email me mark@option911.com. There was no tip of the week last week in observance of me eating turkey in Detroit. There will be one this week.
Sign up for email updates, sign up for the forums, and follow us on twitter!
