Predictions for Friday, August 12th 2022
Quick summary:
Markets expected to finish lower this week (higher than Tuesday, but lower than Wednesday open), after today's bump
From now on, we are looking at direction compared to Wed's open instead of Tue close (even though it will probably hurt us this week)
Trading SPY condors at 410/411 to 422/423 and SPY put at 423
Trading DIA condors at 325/326 to 334/335 and DIA put at 335
Watch this tutorial video to see how we trade this and how to
interpret our predictions:
*NOTE: We changed the way we buy the condors - one leg at a time, instead of all together. In the video, this simply means we first trade the bear call spread, and then the bull put spread, with individual stop-losses on each.
See the explanation in the final section of the post as to what this means.
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Our weekly predictions are here, available exclusively to our subscribers (competition participants get it a day and a half earlier if they leave their email), for Friday, August 12th 2022 (4pm EST; at market close). Keep in mind that our accuracy is much better for low volatility assets, so interpret the predictions with caution. For an overview of our accuracy thus far, see here.
Our estimate for the Friday close for our 5 major indicators and 2 stocks this week is the following:
From this point on, we will focus our directional predictions on Wednesday open, instead of the usual Tuesday close. Why? After going through the data we saw that our performance is even better if we make the directional decision (the calls or puts) with respect to the Wednesday open, rather than the Tuesday close.
Having said that, this very same strategy will most likely backfire this week :) Our predictions are suggesting lower values on Friday compared to the Wednesday open, but slightly higher than Tuesday close. Before, this would have suggested we buy no directional hedge, which would have been a good idea for this week, as the condors will most likely survive, but the puts will probably take a small loss today.
Another novelty is that our DIA and SPY condors are given new confidence intervals. Instead of the usual [-2%,+2%], we will be using [-1%,+3%], as our predictions tend to overshoot on the upside rather than the downside much more often.
This increases our probability of staying within the condors this week, unless of course, the rally continues even stronger following yesterday’s pleasant CPI surprise.
How did we trade this?
As per our predictions, this week we're trading 410/411 to 422/423 SPY 12/08 iron condor (10 contracts) for $440 immediate gain. We again bought separate legs of the condor - a bull put spread (410/411) and a bear call spread (422/423), and placed stop
losses of 50% on each.
We are buying a put for downside protection, 1 SPY 423p 12/08 for $6.3. As it moves out of the money today it will most likely close at a $300 loss.
For DIA we are trading the following iron condor (again with separate legs): 325/326 to 334/335 DIA 12/08 (10 contracts) for $460 immediate gain.
We are also buying 1 DIA 12/08 335p for $3.65. Same as above, moving OTM today means a small loss of $180 will be sustained.
As mentioned on Tuesday, this week we’re jumping on the VIX bandwagon as we noticed good directional performance over time. We added 50 VXX shares (an ETF following the VIX), bought at $21.6 per share. That’s $1080 spent. The stop loss here is more conservative, if the VXX price drops to $20, the order is triggered and we accept an $80 loss.
Let’s see how it goes!
DISCLAIMER: This prediction survey is still in its testing phase. Neither the survey nor its results act as investment advice of any kind, nor should they be considered as such. The results of the survey need not correspond to actual market preferences or trends, so they should be interpreted with caution. Oraclum bears no responsibility for your investment choices based on these predictions.
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