A friend of mine has an expression, "Nervous as a long tailed cat in a room full of rocking chairs". The current market environment is difficult to describe; recent volatility has set records. The market shifts by several percent in a matter of minutes based on unsubstantiated rumors. In short, it is a scary place to be. Today's market opened to a lot of good news. The German parliament voted to support the proposed European sovereign debt bailout structure. Initial claims for unemployment in this country dropped by 37 thousand to 391k while continuing unemployment claims dropped by 20k to 3.729 million. Second quarter GDP grew by 1.3%, beating expectations of 1.2% and the first quarter's 1.0%.

All of this positive news resulted in strong open to trading this morning; SPX traded as high as $1176 during the first hour of trading, but quickly started to give it all back, hitting a low of $1140 about 3 pm EDT. Then the markets rallied for the last hour of trading to post gains for the day. SPX closed at $1160, up $9 and RUT gained $11 to close at $663. Trading volume was up modestly with 3.6 billion shares of the S&P 500 trading; trading volume was up 8% on the NYSE and was up 19% on NASDAQ.

Directional trading in this environment is extremely difficult. Even stocks with stellar financials and future prospects, like AAPL, are being jerked around on a daily basis. I normally think of IBM as a slow and steady blue chip stock. During the month of September, IBM's share price has traded over a wide range, from $159 to $181. Implied volatility of IBM's options has been running around 30-35% since the August crash - a big change from the "good ole days" when it ranged around 15%.

So what's working now? Legging into iron condor spreads has been successful for me, but it is a dangerous business. Normally, I position both sides of my iron condor on the same day. If you can place your put spreads on a weak day when you believe the market has hit bottom and vice versa for the call spreads, you can end up with condor positions that are quite wide. For example, my Oct GOOG iron condor is placed at 480/490 and 580/590, $90 wide. But timing your entries is tricky. Probably the best advice in this market is to be much more picky than usual about your trades - there is nothing wrong with passing up opportunities and waiting for a higher probability play.