It’s a short holiday week this week as we celebrate Independence Day. This morning, we expect a dip in the S&P 500 MINI SPX OPTIONS INDEX (XSP) near the open where we may be able to exploit the fact that many investors will be checking out this week due to the holiday on Thursday.

In that light, we will use options that are Cash Settled / European Style that we do not have to monitor closely at expiration. These options do not have overnight exercise risk, because they cannot be exercised until expiration. Plus, because they are cash settled NOT delivery settled. This means we don’t have to worry about being assigned shares of stock that could be volatile as investors come back from vacation.

This Volatility Term Structure looks pretty normal for this asset. To learn more about Volatility Term Structure, click here. Shorter-term options have lower volatility expectations than longer-term options. If we can get a little bump in the price of XSP options this morning, the volatility expectations for options expiring on July 3rd look like the market is not expecting volatility to increase much before the holiday.

The S&P 500 and other broad-based indexes are always at the top of news and social media mentions. This week with the holiday on Thursday, we expect liquidity in the market to dry up leading into the holiday. Using a high-probability strategy with Cash Settled / European Style options, we can create a strategy that has limited risk with a high probability of success without fear of assignment. This strategy is great, even if you decide to check out for the holiday.

To get the details on today’s trade, be sure to read today’s ODDS Online Daily Option Trade Idea.

To access Odds Online Daily and be able to see any stock you are tracking in this software, click here.

Thank you,

Don Fishback