CSCO, one of my holdings, had a large price rise today, traversing 1.9% low to high so far.
This presents me with a decision. My position is an iron condor, with maximum profit at expiration between $23 and $25, and lesser profit, again at expiration, down to $22 and up to $26. The structure is p22/-p23/-c25/c26.
The jump up came on a positive analyst rating from JP Morgan, with a price target of $28.
So, with the stock trading at $25.68, my current loss is about 20 cents a share. If the price held steady (which it won't), that would lead to a 37 cent loss at expiry 11 days from now.
JP Morgan's $28 target would produce a loss of more than 97 cents per share.
On the chart today's rise pierced significant levels of resistance, and it pretty much is clear sailing up to $28, so my instincts are telling me to jump ship and swim back to the pier.
Another factor in the decision is that we're in the period when short options -- options that I've sold to someone -- are gaining price rapidly because of time decay, the process by which options lose value the closer they get to expiration. Altogether the gain is more than 2 cents per share per day, a not insignificant sum.
The psar, pps and macd are bullish. The mfi and sto are in overbought territory but have not yet crossed down below their respective signal lines, which is what's required for a bear signal.
We've all heard the mantra that fear and greed drive the markets. Well, this is fear and greed in the spades. What to do?
The broad market has stalled today in its rise since Feb. 5, but it is in an uptrend still.
I'm also loooking at a very short-term chart, every 133 ticks, and it has been in a downtrend since 10:45 a.m. Eastern. I'll be watching that as I make my decision.
Tough choice. Stay tuned.
Abbreviations:
pps - Person's Proprietary Signal
ma20 - 20-day moving average
macd - Moving Average Convergence-Divergence
mfi - Money Flow Index
sto - Fast Stochastic
Topic: Cisco Systems networking
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