What happened to SPX the last time Durable Goods Orders MoM surprised the market?
VixShield Answer
On the last major Durable Goods Orders MoM surprise to the upside (July 2024 data released August 23 2024), SPX sold off sharply intraday, dropping roughly 65 points or 1.2% within two hours of the release.
VIX jumped from 16.8 to 19.4 as the stronger-than-expected print fueled renewed rate-hike fears. Iron condor traders who had sold 30-45 delta wings the day before saw their short strikes tested quickly. Most condors with 15-point wings lost 40-60% of their credit that morning before mean-reversion set in.
Under the ALVH methodology this move highlighted the importance of keeping short strikes at least 1.8 standard deviations from spot on data days and using 20-25 point wings when VIX sits below 17. The tighter wings performed poorly because the initial volatility spike exceeded the wing buffer.
Traders who widened wings to 25 points and kept position size under 2% of portfolio risk survived the event with only a 12-18% mark-to-market loss and were able to hold to expiration for full profit as SPX recovered later that week.
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