Market comments 20221025

5.4% rally in 3 days. We can rightfully assume that we will see a bit of correction or at least a sideways movement in the coming days.

I took the opportunity created by this rally to close a few of my positions and free up some capital. My 'forever positions' (QQQ, SPY, IWM) are being tested big time on the call side and I must admit that I was too slow to adjust my put side because I wasn't expecting such a big rally. I was thinking that perhaps I should buy some put options in SPY to give me a bit of peace of mind against a potential market collapse that many experts are screaming about but if the market is supposed to collapse then why did it go up by 5.4% in 3 days.

To a great degree, it's just all speculation as nobody knows what's going to happen. Consequently the best we can do is to guess the winning side. This is where the sophisticated statistical measures come, like the delta and the IVR, come to our help when trading options.

So what's my trade for today?

I chose #GM (#GeneralMotors) with a wide strangle post earnings. Reminder: before earnings the volatility tends to be very high and collapses straight after earnings, which gives the options traders the opportunity to profit within 24 hours, however the large swings in either direction can be painful. Placing trades after earnings are significantly safer and more sustainable.

The stats

Trade Type: Short Strangle

Strike: $32 / 42

Expiry: 18 Nov

Delta: -1

IV Rank: 51.7

Premium: $0.63

Cap Req: $372

Annualised Prof at Expiry: 258%

IMPORTANT: Studying previous trades provide the opportunity to everyone to learn a great deal so I encourage you to click on the links below and digest the info.

Closed:

https://www.tycoonitos.com/community/market-comments/market-comment-20221006

https://www.tycoonitos.com/community/market-comments/market-comments-20221010

https://www.tycoonitos.com/community/market-comments/market-comments-20220915

Rolled:

https://www.tycoonitos.com/community/market-comments/market-comments-20220524

https://www.tycoonitos.com/community/market-comments/market-comments-20220421

https://www.tycoonitos.com/community/market-comments/market-comments-20220520

Let me know your thoughts.