Just a quick post to remind you of a couple of things. One is to always respect support and resistance levels, knowing they have a better chance to keep the underlying from moving through that level. And two is that if support and resistance are keeping the underlying in check, consider a neutral calendar.
Sideways Channels
Even though the market has been volatile with huge intraday swings at times and gaps on the open fairly common, there are some neutral opportunities out there and we’ve been focusing on them in MTM’s Group Coaching class. If the channel is large, I also explore iron condors, but my first look is usually a long calendar.
Take a look at the charts below, which present recent examples SPY, MU and AAPL. All three charts show the level of support and resistance keeping the underlying from moving higher. And in all three cases, we were able to put on a successful long calendar. We let the underlying do its thing and stay in its channel until we were ready to remove risk. If the underlying would have moved out of the channel breaking support or resistance, we would have pulled the plug on our neutral strategy.
SPY
MU
AAPL
Final Thoughts
Again, this is just a reminder to look for neutral opportunities in the market, not just directional or vertical credit spreads. Implied volatility levels have been high, and IV skews have been generous because of the volatility, giving an extra edge to long calendars. Happy trading!
John Kmiecik
Senior Options Instructor
Market Taker Mentoring
