Markets accelerated higher last week on Powell's tone and a weak jobs number Friday. Yields spiked but have given up a decent chunk of Friday's pull back.

Volatility premium has dropped, but for good reason as it appears Powell feels we are at a fairly restrictive policy rate and that the risk to the economy when hiking now may outweigh the risk of runaway inflation if they do not hike. That is a substantial shift in thinking going forward as they will try and avoid hiking if at all possible considering the risk of hiking outweighs the risk of inflation at this point.

He makes a reasonable case, if his assumption that we are already at a fairly restrictive policy rate is true. Why would you continue hiking if you know you are already restricting the economy, now especially so if the risk to the economy outweighs the risks of runaway inflation if you do not hike. 

We are going for a very short term trade looking for the market to consolidate a bit at these price levels. 

I have included a chart of the 10 year Note - we will look for it to retest the upper channel line after breaking out next week. That could be the buy in treasuries, and the start of lower yields coming at this market. 

We are placing an Iron Condor Trade in the SPY. If you are not comfortable with this trade and do not understand a 4-leg option trade, then do not place it. 

We are essentially selling a credit call spread above the market, and a credit put spread below the market, looking for the SPY to close tomorrow within the 431-436 price range. We are risking about $60 per contract, with  a max profit of the $0.40 or $40 per contract, the credit we receive upon placing the trade.

This is a  bearish Iron Condor, as we are giving ourselves about $1 above the current price, and then about $4 to the downside. This trade expires tomorrow at the close. This is a very high risk trade and will result in a 100% loss on many occasions, so only risk a small amount that you are able to lose entirely if this market moves against us one way or the other. 

The SPY is currently trading at $434.99. 

Sell the Nov 7th $436 call

Buy the Nov 7th $437 call

Sell the Nov 7th $431 put

Buy the Nov 7th $430 put

This should result in a net credit of about $0.40 per 4-leg trade. You receive a $40 credit, and your max loss is $60 per contract. We would be looking for the SPY to close anywhere between $431 and $436 as of tomorrow's close for a max profit.

Stay tuned for updates as this trade expires tomorrow after the bell.

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