Condor Options

The unemployment and nonfarm payroll numbers have just been released, and they were worse than expected.  Reaction in the futures was negative: just seconds before the data was out, Dow futures spiked to +70, and are now sitting at about -20.  Rick Santelli (the only credible person on CNBC): “This is the worst headline jobs number since March 2003.” But as we mentioned last night, even though there’s a lot of chatter about how important these data points are, implied volatility suggests otherwise.  Quantifiable Edges has some historical numbers suggesting that we won’t see a volatility explosion after the report.

In terms of our trading, continued low volatility will just mean more opportunities for long vega plays (like calendar spreads and double diagonals).  If we get a significant rally today, that will likely push the markets into an extremely short-term overbought status, providing a nice setup for some selling to start next week.  Alternatively, if the market indexes can’t push through the resistance today that they’ve been battling all week (cf. chart at right), they might not get another chance to do so for awhile.

We currently have two iron condor positions open for April expiration in our newsletter.  Both trades are up slightly, and as always we have time on our side.