[Options] Porous Levels

Sean McLaughlin
May 11, 2022

"MARKETS IN TURMOIL!" -- they said.

But yeah, it certainly feels like it when seemingly every "relief rally" is met with fierce selling.

In our morning analyst meeting today, the team was lamenting the fact that it seems any levels of support that might seem obvious are proving to be nothing more than mirages. Levels are getting taken out everywhere.

This makes it increasingly frustrating to put on any kind of range-bound delta neutral plays. Yes, volatility is high and its very tempting to put Iron Condors or Strangles on here. But if we're looking for instruments that are likely to stay within a certain range, we just don't have any confidence right now in any levels on our screens.

Ok, so how about we bottom-fish for some bounces?

My comment to the team was: "You guys know me, I generally don't like to catch falling knives. But if you can come up with a compelling case and a significant level of nearby support, I might be willing to take a flyer."

The universal response from the team was: "Uh, yeah, no. There's nothing out there that we'd feel comfortable calling a near-term bottom in."

So, as options traders, where does this leave us?

The short answer is, there is opportunity out there for those willing to take some heat. There always is in markets like this. But it won't be easy. And it likely won't offer you rest-filled evenings. And you all know how much I value my sleep.

As such, we're going to sit on our hands today. This stock market (and all the external forces weighing on it -- hello crypto, interest rates, inflation, Ukraine!) needs to chill out a bit before we're willing to put on any directional risk, and define some levels before we're willing to put any delta-neutral bets on for All Star Options.

Join me and Steve Strazza at 2ET today live on twitter as we chat about this more in depth.

~ @chicagosean

 

 

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