I have been trading since 2001, but I've only been trading stock options since December 2020. (thanks to covid for boring me into action and learning how to do that)
There was some big news that hit today during the time that I normally trade. Since I am in Hawaii, I only catch the end of the NYSE (new york stock market) since that is on the east coast, usa. I did try for a short time, to wake up at 3:30 am on trading days (monday-friday), but I found that it only cost me money as I made some stupid decisions and/or stupid mistakes when I'm half asleep. (zombie trading) Here's what came out at 9am my time..
FOMC (federal open market committee) comes out 8 times a year, about 6 weeks apart. As you can imagine, many people are heavily swayed by what is said at these meetings, so price can move violently and without logical cause at these times.. I would say at least 1 to 2 hours after the news hits.
Here's the 5-minute chart from today..
As you can see, price started acting wildly right after FOMC hit at 9am, then took off about 9:30am.
The few hours BEFORE news hits (FOMC especially, but it applies to most big news) people are in a wait-and-see mode, so price usually only moves in a small range.. today this range was just 20 points.
I have learned over these past 2 years, to try and NOT lose and only trade the best setups. (90% probability of profit or better) This behavior qualifies as it happens about 90% of the time.
A strategy that I use when I think price will settle down and stay in a small range is called an Iron Condor. An IC, despite sounding very cool, is a complex trade where a trader simultaneously sells a call credit spread (used to profit when price will move/stay BELOW a certain price), and selling a put credit spread. (used to profit when price moves/stays ABOVE a certain price)
All that is required is to set the correct levels for each credit spread.. and for price to move between these two levels.
Next time I will go for it! I was taking the cautious approach and staying out of trading today. I do feel that this more cautious approach to trading (only trading when those super high POP trades set up) will increase my ROI.. :)
