Indecision
14th June 2009
The stock market continues to trade in a narrow range half way through June as the debate rages on between the bulls and the bears. There are good arguements on both sides of the fence, most likely leading to the market going virtually nowhere for a while. The SP500 is trading between 875 and 950, the DJIA is confined by 8200 and 8800, while the Nasdaq 100 has been a little more volatile between 1350 and 1500.
Upside momentum continues to diminish as interest rates have started to rise. This is likely to be a better time to be selling premium than buying premium, even if you have a directional bias.
The Iron Condor is a good strategy for a relatively stable market that may be a successful approach for the July expiration. This is the combination of selling a Bull Put Spread below the market and selling a Bear Call Spread above the market. You can enter this trade all at once, orenter one side at a time. For example, with the market currently on the high end of the trading range you could sell the 100 call on the SPYand buy the 101 or 102 call for protection to enter your Bear Call Spread. Then wait for a market pull back to around the 900 level on the SP 500 to sell the 87 put and buy the 85 put to enter the Bull Put Spread side of the trade. How you approach this trade is a matter of personal preference.
JD
