So much for sitting back.

Well, the market fell off pretty steep in the last two days. My idea of playing a daytrade off the gap would not have worked as, even though there was a gap, it was small. The pre-market basically started where Thursday's post market ended and headed down from there so the gap was only due tot he regular market hours start. The drop and rally were only indicators that it was going to head south, which it did.

But I am not daytrading right now.

My latest condors are giving me some high risk indications as the worst thing that can happen in an iron condor is for the underlying to have a large move right off the bat. Up is not so bad as it is usually coupled with a lowering of the VIX so the put premiums follow a depreciation pattern that makes up for call premiums increase, sort of. in the case of a large drop the VIX jumps, the puts get overly inflated and the calls cannot hope to make up for that loss in premium credit so a larger off the gun drop in profits is in order.

And I had two solid days of large drops putting my positions deep out of the money over all. While this could be a setback it is not catastrophic, just poor timing with me putting so much into the trades. I still hope to have my next cash deposit in in time to place two more February EOM trades, at this point to help make up for a potential loss if I have to close out the current trades. Those trades, due to the higher volatility, will have a wider margin and allow for a greater potential market move. I was attempting to set trades that were favouring a larger profit on the call side but was finding that execution was not going in my favour due to being a the odd trade out...so I stopped. I should have pursued that course longer as it would have been the better option.

I may consider placing call only trades next as well...at least it is worth investigating.

About closing the trades... I would only close the put side of the trade as that is the losing side. Even at that I would only close out the short put first as that is the primary source of the loss. If I feel that the market is still going to head down then I can leave the long put in place and hope to regain some profits as a result while it appreciates. The downside of that plan is that closing the short put only to have the market rally would force me to close the long put as it then starts to become a losing position as well... thus compounding my losses.

I went back and checked to see when we have had a similar patter, two large drops following longish consolidation. In the last 11 months anything remotely similar has bounced back and continued up afterwards. In the 6 months prior to that there were a number of cases that were during the downtrend market move and prior to that there were a large number that were much larger single day moves.

All in all looking back is inconclusive to provide any light on a next move as the market can, and has, done all sorts of variations that are both positive and negative under the current circumstances.

So, sitting back and not watching is not working out like I thought. It is all in the timing. Had I done larger trades prior to this I would be sitting pretty and working soley off of profits rather than having to consider that my closing losing trades might actuall eat into my original capital base.

Here's to a possible rally or further consolidation over the coming weeks.

Jeff.