Nataly Kambur
Last week the S&P500 index futures tried to break below the bottom of the 1077-1230 range. However that was a false breakout, with the price coming back into the range. By the end of the week the futures reached a major resistance around the 50-day MA, which is still unbroken. Once the resistance is not overcome in the short run, the S&P500 will go further down. In this case the following levels will act as supports: 1100, 1068, 1050. Otherwise, if the 50-day MA is overcome, the price may encounter resistance at 1200, 1250, 1230 and around the 200-day MA.
The actual volatility of S&P500 is still high: last week’s weekly range was equal to 105.75 futures points. The highest intraday volatility was seen on Tuesday, Oct 4th, when the price was testing the bottom of the price range (51.75pts). Friday was the least volatile day of the week (29pts).
The VIX indicator shows that last week that expected volatility of the S&P500 index was declining as the market was rallying. This is the volatility peculiarity of this market segment.
This week’s news calendar
Besides, US companies are about to start publishing their quarterly reports. This week an option trader’s trading tactics could be as follows: if there is a rebound from the 50-day MA (a return into the range and an increase in the expected volatility due to the bearish movement), buying condors will be a good solution. However such trades will need monitoring, further adjustments and tough (conservative) money management as there will be a lot of major economic reports, which could cause a sharp increase in the actual volatility, thus possibly making some potential losers. If the rally continues, with a decline in the expected volatility, one can buy straddles and strangles in advance of some major news.
Provided by the Department of Options,
Nataly Kambur
