Options Trading Newsletter - Life Changing - Issue #168 [Options Today -IRON CONDOR ON MSFT]
Life Changing...
Life Changing
As the milestone of 50 approaches, I find myself pondering the truly life-changing moments I’ve encountered. There’s no denying the significance of life’s milestones, the pride of graduation, the joy of a first job, the love found in marriage, the comfort of a new home, and the delight of raising children. These events have indeed shaped my journey, as they have for many.
Yet, if these aren’t the essence of “Life Changing,” what is? I’ve come to realize that life-changing isn’t about what happens to you, but rather what you do for others. It’s the positive impact you make on someone else’s life. How have you helped your children grow into better people? What have you done to bring more happiness to your loved ones? How have you contributed to making the world a more livable place? Perhaps it’s the wisdom you’ve imparted that has enabled someone to lead a better life. This, to me, is the true measure of life-changing influence, not on oneself, but on others.
As we age, the focus shifts from ourselves to what we can do for others. What actions are you taking today to make a difference in someone else’s life? How will people remember you? As I pen this newsletter in its third year, I reflect on the impact I’m having on my readers. While it may not be the most acclaimed newsletter, it’s a vessel for sharing my thoughts, with the hope of inspiring you to delve a little deeper into financial literacy. If even a single word or article encourages you to take a leap of faith into trading or investing, then I’ve sparked a “Life Changing” event for someone out there.
“The best way to find yourself is to lose yourself in the service of others.” - Mahatma Gandhi
SPX (5277)
SPX was mostly down for the week falling back below the previous high of 5264 up to Thursday. After the PCE announcement at 830am Friday, the futures rallied and on market open SPX followed suit but was only shortlived before a massive selldown occurred with more than 60 points selldown. About midday, the bulls came back in control and closing the day with a very strong bullish candle.
Whatever happened, it was a whipsaw day if you thought the market would crash and put on your shorts just about at the lowest for the day before it u-turned on you.
Mostly all stocks was in the green except NVDA which was totally the different picture from last week shown below. We expect that the market to continue in the green early part of the week.
Key economic releases this week would be PMI on Monday, ADP Non Farm Employment Change on Wednesday, Unemployment Claims Thursday and lastly Non Farm Payroll and Unemployment on Friday. So this week is pretty much on the state of the economic. It’s rather a two way as bad economy is no good for the market but good for the Fed to fight inflation. But if bad economy coupled with high inflation, then its stagflation. There’s always some justification for everything and how the market manipulators want to put the news to you and screw your mind. So it’s better to watch the levels and look at price action and set news aside purely for entertainment purposes.
This week, we are looking if SPX will retest the previous high of 5341 which is the more likely area it will go as the move last Friday was very strong. We went long on SPX on Friday almost at the bottom of the day and some take profit was triggered and some still running. Hopefully, we can take them off at the highs this week.
Trading range for the week is 5150 to 5350.
NDX (18536)
NDX closed lower for the week by 271 points. In fact, it went even lower by over 600 points due to the massive selloff on Friday which was later regained almost fully by the end of the day. It really scared off many weak hands after the initial reversal shortly after the market opened. As we were short on the market, we were quite happy taking profits on the huge down move. We were waiting for the market to correct itself after the huge bearish engulfing formed on 23 May but the market continued to go up all the way until some signs of weakness appeared midweek.
The gap area we mentioned in past few issues 18300-18400 finally filled on Friday and the market continued back its bullish rally up. We expect this to continue as we mentioned on SPX and for NDX to reclaim its new high is only like 400 points away, so why not.
DELL finally gave way on a break from its high post earnings while HPQ took a reversal to lead this round. Last earnings the position was the opposite for these 2 computer giants. CRM crashed post earnings but regained on the NDX rally up from its lows on Friday.
This week’s earnings. Nothing much interesting, LULU and DOCU on Thursday.
Trading range for the week is between 17900 to 18850.
HANG SENG INDEX (18079)
HSI which initially went up early part of the week sold off again closing down for the week by 529 points (2.8%). We could still see some further downmove but the case is still very much bullish, political sentiments aside.
At key support levels, 17600 weekly 50 MA, we could potentially add on long positions if it gets there.
OPTIONS TODAY - IRON CONDOR ON MSFT
MSFT has hit all time high of $433.6 and retraced thereafter. In fact, the time MSFT spent above $430 is rather limited. It hit $430 in March and then in May. Therefore we could see some resistance above that level. On the downside, the recent low is in April at $389. So it is reasonable to trade this range using an Iron Condor set-up. As long as MSFT stays within this range the trade can be profitable.
Market wise, we are bullish but there’s still some sentiments on the bearish side especially if the news flow is negative. So it may also be choppy for the overall market and not a one sided move up.
Trade Setup (DTE 19July)
MSFT is now trading at $415.13. For expirt 19 July, the expected move is +/- $20.87. Which means MSFT can trade between $436 to $394.26.
Iron Condor = Bull Put Spread + Bear Call Spread.
Sell a Out at $395. Buy a Put at $390. We choose a slightly higher strike than the previous low of $389. It is still fine as MSFT should find good support at this level.
Sell a Call at $445 and Buy a Call at $450. We choose a higher short strike than the previous high to give leeway for MSFT to break above the previous high.
Total credit for the trade is $168 with a max loss of $332. Recheck the pricing on open today. IVR is not extremely high at 19.5 only. However, please take note of earnings on 23 July. Risk is of course IV might rise towards earnings. But we will monitor and take the trade off before earnings.
Exit at 50% profit and Cut Loss at 2x the premium earned, around $336.
Trade Management
As earnings is before expiry, if in profit, just close the trade 2 weeks before earnings. If trade is at lost, see if it makes sense to leg out of any side, if extrinsic value for that side of the credit spread is less than $0.05. We will update on this trade along the way.
OPTIONS TODAY - UPDATE ON BEAR CALL SPREAD ON SMH
A slight pullback last week after it topped at $250.85 and close for the week at $240.48 just at our short strike level of $240. The support is still strong going into NVDA stock split on 6 June. We still see opportunities for a shorter term pullback after the split. We are still holding on to our position for now.
OPTIONS TODAY - UPDATE ON LONG JAPANESE YEN FUTURES
JPY Futures went down further for the week. JPY probably won’t go down very much from here as any further down may result in another US62 billion intervention like the last time. However, we have ran out of time on the trade unfortunately, we are closing this trade for a loss this week.
OPTIONS TODAY - TRADE UPDATE IRON CONDOR ON MICRO CRUDE OIL FUTURES - JUNE24
Crude oil spiked to $78 last Friday before coming down again. Could have exited then but did not do so. There is risk that crude oil could go down further if it does not hold $76 support. The remaining leg is at a small loss but overall the trade is positive as we exited on the upper bear call spread leg earlier. Any move up this week will provide another exit opportunity.
Checkout our Options Trading Newsletter Issue #160 for the trade analysis.
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Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options: https://www.theocc.com/components/docs/riskstoc.pdf
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