After the October CPI report, the markets saw a strong rally, which helped our struggling puts but hurt our calls. We opened a few Iron Condors a few weeks ago, and when the market rallied, we rolled those calls into puts. But soon after we did that, the markets sold off again, and the puts got in the money. It took three to four weeks to get out of the mess.
But last week, we received an October CPI report, after which the markets had a strong rally again. That saved our puts. Unfortunately, I also opened a few call spreads, and the rally was too strong. I feared I would have to roll those calls into puts again, staying in trades I wanted to finish.
Months of heavy selling was undone in three weeks. It was a crazy move! In the last two weeks alone, the markets rallied almost 7%! That is a typical annual return of the SPX… done in two weeks! After the CPI report, the market jumped 2.4% only that day!
But, in the last two days, the markets stalled and remained flat, which helped our trades. All these trades expired worthless, but it was close! We had a 4510/4525 call spread, which expired yesterday. The market finished at 4,508.24 that day. Today, we had another call spread with 4,560/4,565 strikes. I feared that if the market resumed the craziness, I would have another “hot” trade.
Fortunately, the markets stayed flat after the strong rally, but what does it mean now? Is it just a consolidation of the gains or are the bulls exhausted, and this is just a calm before the storm? If you look at the chart, the markets just reached the resistance, and it is prone to collapsing. Maybe. We have to wait and see. We may have Santa’s rally for the rest of the year.
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