Friday's Agenda

Two symbols, IWM and FB, are on the table today for further analysis. I'm passing on one and moving forward on the other.

The symbols broke below their 20-day price channels on Thursday but have low historical odds of success with bear plays. Only half of IWM's bear signals have resulted in a profit, and none of the FB's have.

Low odds signals under my present practices require a direction neutral trade, such as a short iron condor, sold for a credit and expiring very soon.

Of course, signals require confirmation. In the case of low odds plays, confirmation means moving back within the 20-day price channel on the next trading day. That hasn't happened in either case.

However, both have pulled up from yesterday's lows, so perhaps they are confirmations-in-progress. Let's look further.

Positions structured as short positions work best of implied volatility is high.

FB's volatility is low after collapsing from 37% down to 23% in the immediate aftermath of an earnings announcement. Therefore, I'm striking it from the list.

IWM completed a rise in volatility, albeit within the context of a long decline from December 2014. It attained its first higher high since the fall began on Thursday, and now has dropped off only a bit. Plus, it has liquid Weeklys in its options inventory, allowing the construction of a very short term trade.

I'll post an analysis of IWM prior to the closing bell.

-- Tim Bovee, Portland, Oregon, May 1, 2015

References

My volatility trading rules can be read here.

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Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

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