Condor Options

Traders continue to see and hear no evil except European sovereign debt, as the market shrugs off U.S. economic data that, while not significantly worse than expected aren’t exactly indicative of a major turn-around. SPY rallied off its opening half-hour low, broke above its opening-range high of $126.89, and held an initial retest of that level. Breadth is solidly bullish on hope of a swift, long-term resolution to the euro-crisis.

With SPY January implied volatility down nearly three points but December IV off only about one point, our upside risk-management price threshold has dropped to around $127.50. Considering how strong market internals are looking right now, we’re planning to place an adjustment trade this afternoon between 2:30pm and 3:30pm Eastern.

(For members trading manually who think there’s nowhere to go but up today and want to get a jump on the market, we’ll probably be rolling the short position in the Dec 125 calls up to 128. Note, however, that this could vary up or down by a strike this afternoon–or be canceled entirely if there’s an unexpected sell-off. In other words, if you decide to be proactive, also be prepared for the possibility that your risk profile may deviate from the official newsletter portfolio.)