It was a busy session today with:
-Fed Minutes released,
-Nasdaq rebalancing (on 5/2/11) reducing AAPL weighting to 12.33% from 20.49%,
-Cisco admits to stubbing its toe in its “operational execution” and loss of accountability,
-TXN offers all cash to purchase NSM for $6.5B. NSM soared 71% today,
-DMND announces $1.5B merger with PG.
Sheesh, I’m worn out just typing the short recap of the action….and I didn’t list everything that happened today!
The market had strength today but backed off into the close. Volume was again pathetic and there was no real convincing action anywhere. Volatility continues to drain with the falling VIX while markets grind at technical resistance levels.
Check out this insight from one of my favorite blog resources, QuantifiableEdges, regarding the recent rally:
The Russell was up big today but only held about half of its gains. The $85.50 price level rejected the IWM pushing it back down to $85.19 to close. Now here’s where it gets interesting:
We have an IWM Iron Condor on with April options. Our puts are looking great as they are WAY out of the money and should expire worthless next week. The money has already been made on the puts as the spread is only worth a penny or so now. I have been looking to roll them up to higher April strikes to squeeze out some more premium (only a few more cents), but a safe, high probability adjustment has not become available. No worries, a nice credit was received on the puts so there is no disappointment in this trade.
The call side of the IC is still comfortably out of the money. However, depending on just how much strength is behind the Russell, an adjustment may be required. May options have some juicy roll potential for even further out of the money strikes as a result of the rally and new highs. If there is an explosion to the upside which threatens our short call spread it will benefit our roll even more by increasing the May options prices. Conversely, our April options will decay very fast as OpEx continues to approach, thereby setting any roll adjustment up perfectly. Therefore, I am really not worried about this trade. But it’s not over till it’s over so I’m staying on top of this one..….no fat lady serenade yet.
Separately, the strength of the market lately has me eyeing some new May call spreads for deployment soon. Both the SPY and IWM have some really attractive call spreads way out of the money that set up nicely. I want to watch how the current price action is resolved before setting in motion any call spreads yet.
Stay tuned & happy trading!
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