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Today we are applying an Iron Condor on the XJO

Analysis:

The XJO is currently trading at 6,671 points.

The XJO has been slowly grinding higher since the start of December last year with plenty of sidewards movement. As such, there are plenty of key levels of both support and resistance that are helping to keep our market from trending strongly one way or another.

Fundamentally, markets seem to be reweighting and switching from growth, tech, and stay-at-home stocks to more cyclical and value stocks. This has caused whippy movement and volatility, but ultimately little to no gains or losses the past month or so.

It is fair to say that the market despite the volatility is likely to continue grinding sidewards to higher. We can trade this by implementing an Iron Condor with sold legs at roughly 7050, and 6650 and an expiry for the 25th of March. These strikes and expiry net us a great credit and provided the XJO stays between the sold legs come the expiry we make maximum profit.

The 6650 sold leg is below the key level at roughly 6,666 – a level the market has been reluctant to break recently. The 7050 sold leg is much higher than the post-pandemic high of roughly 6,950. Considering the market is trading in an uptrend, it makes sense to give more breathing space to the upside. In addition, when the market breaks, especially in recent history, it seems to only make small gains before falling again.

This is an example of an Iron Condor, a sideward strategy unique to Options, being used with a slight skew – in the case, to the upside.