My apologies for the delay in this post…migraines suck.
Before the FOMC statement, I started a trade aimed at taking advantage of the volatility inherent in market declines. My rationale for the trade was outlined in this post.
The trade is as follows: I bought Aug 52 calls and Aug 51 puts. I paid a premium of 2.80 per pair. The 52 calls I got for 1.386 and the 51 puts 1.413. Right now $QQQ is hovering in the zone (51-52)where both of these are OTM…though I don’t expect that to last too long.
My contingency for that scenario is as follows: My risk tolerance dictates that will likely have until Monday for this trade to sort itself out. If the price of $QQQ is still in this same range at that point, I think a sharp move in either direction will become an even greater probability. In that case I will look to be a buyer of another strangle at a further expiration month.
Even if this trade doesn’t work, I still think any sort of “range-bound” activity will eventually resolve itself with a big move up or down. So I will be watching closely to determine what my next move will be.