Market Overview
There was a major selloff on Friday for whatever reason(s).
The general picture is becoming clearer: this economy might actually be
on the edge of a recession or worse. The housing crisis isn’t going
away - a recent Goldman Sachs report said they think it may take
“several years” for housing prices to adjust down to fair value. And
let’s remember that without housing, our economy isn’t really worth
talking about. In the short term, Bernanke’s rate cut may boost the
markets if he opts for 50bp, rather than the 25 basis points already
assumed. But a little extra cash isn’t going to solve what are
fundamental structural (Greenspan-induced) problems.
Positions Overview
We don’t like excitement. And so far in this cycle, only one of our
three positions has been a cause of any excitement: the QQQQ trade. Our
short call at 50 was touched intraday on Tuesday, but went right back
down and now the index sits at 48.23. It would take an unprecedented
move for QQQQ to bounce back up above 50 before expiration, and we’re
very confident in this trade.
As for our SPY and IWM positions, the indexes are almost exactly at
the midpoint of our trades, right where we like them. The nice thing
about iron condors is that when they work, they couldn’t be any easier
to maintain - you just let them sit! So there’s not much else to say
about these positions except that so long as we don’t see a big crash
or some kind of financial absurdity (i.e. a 1.25bp rate cut) before
expiration, we should be sitting pretty.