Some days in the market are more active than others. One of the mindsets that we teach new traders is to ride the wave, go with the flow and generally trade what you see. Today’s market action is slightly bearish. The financial sector is leading the charge lower while the S&P 500 has failed to hold 2000 yet again and is selling off from resistance. The US Dollar is slightly up while almost all other currencies are down. Most forex traders believe the technical’s are stretched and due for a correction, so as you wait for confirmation and triggers in other areas of the market here’s a trade idea. Apple computer has a press conference at 13:00 EST. This will be a volatility event.

There are generally 3 ways to trade an event like this.

1. Sell the volatility. This would come in the form of an Iron Condor, short strangle or exotic spread that has a net negative vega. Iron Condor is probably the best choice for most traders here. Use options 45-75 days out below .20 delta on the short strikes. Use this technique if you believe that the news will be a dud and Apple will generally sit in a range.

2. Buy the volatility. If you’re looking for short term action then try an inverted butterfly on the 3 or 10-day options. Consider a long condor as well. The currently projected volatility for the week is +/- 4.00.  If you’re new to this type of trade consider a simple straddle or strangle using the weeklies.  They’re relatively cheap and you can practice this technique.

3. Wait until after the event and play it as a directional. You can prep and plan everything in advance and then simply trade the action that follows the event. The advantage is that you get to see the market’s reaction and then trade, the disadvantage is that you have to chase down the prices to get filled.

Regardless of what play you decide on, remember what we say here at Tackle Trading, get in the game.

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