AAPL & IWM Call Credit Spreads & The Melt-Up

The market has been fairly quiet this week but there has been a lot to react to: More solid earnings, smoking hot PPI, Fed Minutes, light Retail Sales, Obama's budget talk, and increased Consumer Spending. Whether good or bad, the melt-up continues. In fact, as of today the S&P and Dow have doubled from their 2009 lows! The market is looking for the next catalyst as earnings are already baked in. For the past year-and-a-half stocks have retreated into the end of earnings season. However, since late November 2010, every time the market lets the Bears drive (read: a small pullback day of 0.25%-0.5%), Investors scoop up everything and anything. Although the market is overbought and sentiment is approaching the moon, I am way too much of a wimp to get short here. Conditions like this ate my lunch on a few trades in the third quarter last year (when I fought the trend and price action) and many other traders as well. Price action is what matters and the action has been solid despite being overbought. I do expect some sideways trading digesting the gains but I still think the next move is higher. I expect to see S&P 1350 before S&P 1300. For the rest of the week I expect the same ole same ole; a slow continued grind with upside bias. So, what does that mean for our open AAPL and IWM call credit spreads? Great question, I am glad you asked ;-) I don't see anything to juice the market higher by Friday, just a continued grind. Solid resistance and ample distance lie between the market close and the short strikes of both call credit spreads expiring Friday. This increases my confidence that any unforeseen jolt higher will be somewhat contained or slowed down at least. Tomorrow's market action will dictate if we leave the spreads open through Friday's expiration or close them early; or adjust if prudent. Option Expiration day always has the potential to for large movements and it generally isn't worth a few extra pennies of profit for the exposure of white-knuckling it through Friday's close if things get tight. Remember: Nobody ever lost money taking a profit! Solid profits are already available on the positions so early closing of the trades, if necessary and/or if there is a lack of a profile enhancing adjustment, will still yield good returns. Stay tuned traders……….