Condor Options

Yesterday we were blindsided by an explosive end-of-day rally in IYR. The gain for the day was a whopping $4.21–that’s more than 3½ times IYR’s  one-day standard deviation (which means the statistical probability of such a huge one-day move is less than 0.02%). Short-covering probably was a big factor in the size and speed of the rally…but regardless of the whys and wherefores, the market erased a week and a half’s losses in a matter of hours.

IYR has lost some ground this morning, taking the heat off our adjusted position for now. Yes, if we hadn’t made yesterday’s adjustment, we’d be in great shape right now–but over the long-term, we can’t bring in steady income by hoping for a 3 ? event to magically save our trades, so we definitely did the “right” thing. All we can do now is keep on top of our current situation.

If the rally resumes, we’ll adjust accordingly. Until then, we just have to keep a close eye on IYR to see whether yesterday was a false move or the start of a new trend.