One monthly report that generally moves the stock market is the NFP or Nonfarm Payroll Report that is issued the first Friday of every month.
The report is issued at 8:30 am ET and 7:30 am CT, before the market opens. When the market opens, often the market will make a hard move one way and then come back the other way over the next hour or so. This can make for an interesting speculative play using options.
This is not normal, non-directional income style options trading.
The way to play these moves with options is to wait for the initial move to move hard in one direction and then sell option verticals above or below. Then, whenever the market moves back the other direction, you can close those option verticals that you sold profitably or continue with them if the market stabilizes. Often the market will move one way and then the other and continue to sway the rest of the day. For instance, if the market opens up, you could sell call verticals in a broad-based index like SPX. Once it is moved up about 10 to 15 minutes, watch for a market reversal in order to buy those back, or you may be able to continue with a market reversal the rest of the day.
Conversely, if the market opens down, you could sell put verticals on SPX or a broad-based index and when the market stabilizes or if it goes the other direction, cover those verticals. You could even continue with them the rest of the day. This is often easier to do than buying a straddle, where you buy an at-the-money call and put the day before. Often, the volatility will come out of that straddle, which will crush the profitability of the play.
There is also an income style trade that could possibly be set up using these moves. You would simply sell the vertical in the SPX calls or puts, depending on which way the market opened. When it goes back the other way, sell the other vertical and you should have a fairly broad structured iron condor. Of course, this is not without risk, and this kind of move needs to be done small and practiced a lot on paper before trying it live. Whether you sold just the verticals or are creating an iron condor, I would sell my shorts at a delta between 14 and 18, so that you are far enough away from the market and not too close.
Practice both of these on paper tomorrow when the jobs report will come out and see what you think.
Mark Fenton, Senior Options Mentor.
Email him at info@SheridanMentoring.com