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Weekly Options Trade Watch 7/24/2014 – Weekly Theta

Disclaimer:  This is not a recommendation to take a trade and is being provided for educational and informational purposes only.  See the full disclaimer.

Video:

The S&P 500 has been grinding higher this week and made it up to new all time highs.  The ATRts remains in a long state, but the market is now extended a bit beyond the standard deviation offset and there is not a valid trade for the Weekly Theta system.

Yesterday the SPX closed at 1987.01 and the SD offset level is down around 1973.  In order for a trade to fit the parameters of the system, we would need to see a pretty significant pullback this morning.  We’re a few hours ahead of the open as a write this and /ES futures are trading flat to slightly higher so it doesn’t seem likely that a pullback will take place, but anything is possible.  There is some economic data being released this morning and that has the potential to move the market.

The Trade:

At this point, there is not a valid trade for the system because price is extended well beyond the SD offset.  If price trades down below 1973, the system can take a trade.  The reason the system uses the SD offset as a filter is to avoid situations where the market is over extended and has the potential for a sudden reversal.

Chart:

SPX Weekly Options Trade

 

  • Andrew Tay

    “In order for a trade to fit the parameters of the system, we would need to see a pretty significant pullback this morning.”

    I can sure use a pull back today…. I have an IC on and the call spread is too close for comfort!

    • It doesn’t seem like the markets want to head significantly lower this morning, but it can always change.

      If it makes you feel any better Andrew, I have a SPX IC on that’s experiencing a little pressure on the call side as well. Fortunately, the long SPY positions I have are offsetting some of that pressure. We’ll just have to see how it all plays out . . .