Stock exchange news. During the previous week S&P500 index future was moving within the previously formed wide flat zone, having tested the top line 1200 and having turned back to the range area. Option barrier 1150 was the flat zone bottom line during the previous week. The market is uncertain, and any outcomes about the further direction can only be made after a real (proved) break of one of its key levels either 1100 and 1077 on the way down, or 1200 and 1230 on the way up. Other levels of support and resistance remain the same, but their role is currently less topical.
Uncertainty of investors about a further flow of events was reflected by chaotic intraday motions, which is proved by another appearance of squeezes (long day candlesticks), and by increased volatility: although the daily motion range was considerably small due to the “swing” motion pattern and amounted to 67.25 future points, on Friday daily volatility has amounted to 47.25 future points, which is quite a lot for S&P500 index. Volatility characterized by VIX index has risen more vividly: on Friday its value was higher than 40, which usually means a “storm warning” at stock market.
The calendar of economic news issues for the following week:
It is currently more efficient for option traders to conduct protected volatility sale by means of buying wide-range condors due to the combination of high level of expected volatility and flat motion pattern. Buying volatility by narrow strangles or straddles can also be justified provided that the points of entry are carefully searched for at the moments of declining expected volatility on the eve of important news issues.
Prepared by: MF Academy Department of Options
