We are back! What a week we have seen last week. I am not sure if you were paying attention but the markets basically ground to a halt! One could say the markets were being held hostage by the FED announcement that came today. It, of course was much to do about nothing. The rates stayed the same and the market had little reaction to it. The market has just been creeping back up to that all time high and that appears to be where it is heading.

So what does this mean for our trades? You know the ones we made while the market was in consolidation? Well, we will see exactly what happened when we get to this weeks video but before we do lets re-examined something I mentioned last week. The different trades we have been talking about that work well in consolidation have very different characteristics but can still function well in the sideways chop of the consolidation phase as we will see this week. The market has broken out to the trend and that trend is upward and this gives us a unique opportunity with one of our mock trades that we have on.

Before we get to the video and the extra boost we are about to receive….that for some reason rang ACDC in my head…for those about to rock!!! We are going to talk about the last trade that works well in consolidation and that is the iron condor. This trade is ideal for consolidation but the underlying that we use must stay in that consolidation or we find we have a busted trade. We will not go down that rabbit hole just yet because we need to explore the make up of such a trade before we get into the various pitfalls that could beseech us.

The iron condor is essentially two credit spreads put together. A Bull Put and a Bear Call spread together. Now, credit spreads are also a decent trade for consolidation as well as other phases of the market. For a credit spread we are essentially buying one option and selling another and we are collecting a credit for the trade because the option that is sold is closer to the money than the one we buy and therefore the premium is greater in the option sold. If you are not familiar with credit spreads but you have been reading this blog recently and you went through the naked put section then just think of the Bull Put spread as a naked put with insurance behind it to limit risk.

The credit spread is a very common cash flow trade and works well in sideways conditions. I am going to breakdown the Bull Put spread in the video so that you can see the makeup of it. I will follow that up in next weeks blog with the other side of the iron condor trade and that is the Bear Call spread. Once we have explored the two trades then we can go over why the iron condor works so well in this phase of the market. Enjoy this weeks video and let me know what you think of the special bonus the market has given us with our mock trade.

Trade Well Everybody!!!

Coach Holmes