In my opinion it the S&P 500 is due for a little upside action. Once again I use one of my favorite option strategies, the iron condor. When you sell an iron condor, you are selling a put spread and a call spread at the same time. There are more than a few ways to trade the S&P 500, but my favorite way is to trade the SPDR S&P 500 ETF which trades on the New York Stock Exchange under the symbol SPY.
A lot of times when I sell an iron condor, I am direction neutral, and will place the short strikes an equal distance from the current underlying price. Right now have a bullish opinion on SPY, so I set my put side up a little closer to the current price of SPY. This increases my premium, but also increases my risk to the downside. I also set my call side a little further away than I would normally.
I sold the 232/236 put spread and the 268 / 272 call spread for February 15th, 2019 expiration, which is 42 days away. I collected $108 as my premium. This iron condor is skewed to the upside, I am looking for a little of a bounce here. Below you can see a screen shot from my tastyworks account. If you are interested in learning about how to trade stock options, I recommend you check them out. In my opinion, they are the best brokerage for stock options.
SPY ETF Technical Analysis
I always like to use stock chart technical analysis in my post, and as usual, I use the Bollinger Bands, Fibonacci Pivot Points, RSI, MACD, and Stochastic. I wouldn’t consider myself a technical trader, but I am a visual trader.
The first thing I do before I enter into a trade, I check FINVIZ, I like to see if there are any upcoming earnings reports, or dividends. FINVIZ is a great resource for all of that.
The Bollinger Bands show that SPY is approaching the 20-day moving average. It has bounced off of the lower band, but is still inside of it. Some traders would consider this to be a bearish sign for SPY, but I think it is just oversold here, so I’m contradicting what my eyes are telling me.
Below you can see the Fibonacci pivot points for SPY. Looks like SPY is approaching the pivot point of 254.15. If it can cross above that, the next resistance, R1, is 271.34. To the downside, SPY has support at S1 at 236.96, which is right about where the short put for this trade is.
The RSI for SPY is currently at 46.42, and is pointed upward. Not really oversold or overbought, just kind of in the middle.
The second bullish signal for SPY comes from the stochastic. Below you can see that it is also showing a bullish crossover. If you look back around December 24th 2018, we also see a bullish crossover from the stochastic. I feel like when it does that, meaning two quick bullish crossovers, the second one sticks.
Some of you may remember my post last month, where I had a similar strategy using the same underlying SPY. I trade the SPY pretty much every month. It is the most liquid underlying that I know of, and that is ultimately most important to me. When things go the wrong way (and they sometimes do) you want liquidity so you can get out at a fair price.
That’s all I have for now, if you have any questions, please leave them below.