The Week Ahead: ARKG, ARKK, MJ, ARKQ, GDXJ, IWM/RUT Premium
Here's what's paying for premium sellers as of Friday's close ... .
For those of you not familiar with my general process, my general order of preference is to trade (a) broad market; (b) sector exchange-traded funds; and (c) single name, in that order. If broad market isn't paying, I look at exchange-traded funds, and -- if those aren't paying -- I look at single name. This week, I think that there are opportunities to sell premium in at least sector exchange-traded funds, so I don't feel the need to delve into what single name is paying and haven't bothered to screen single name here.
In any event, I first screen out exchange-traded funds* that do not have a 30-day implied volatility of at least 35%.
Then, I price out what the 45 day at-the-money short straddle is paying as a function of strike price with the notion being that if the short straddle is paying, then most other premium selling setups I undertake will also be paying, whether it be short puts, short strangles, iron condors/flies, or short verticals/credit spreads. Here, my cut-off is generally a risk premium (credit received)/short straddle ratio of greater than 10%.
In light of this, I probably wouldn't bother playing FXI here, even though it has a 30-day implied of 36% and one that is relatively high in the range (at the 63rd percentile) because it just isn't paying enough -- 6.18% as a function of strike price. In comparison, it looks like "The Ark Complex" is paying, even though some expiry availability/liquidity makes the exchange-traded funds in this grouping less than ideal to trade.
Exchange-Traded Funds Screened for Options Liquidity and 30-Day Implied >35%:
ARKG (Genomics) (60 rank/61 30-Day): June 18th (33 Days)** 77 short straddle, 9.20 at the mid price, 11.95% as a function of strike price, 132.2% annualized.
ARKK (Innovation) (52/54): July 2nd (47 Days) 104.5 short straddle, 14.45 at the mid, 13.83% as a function of strike price, 107.4% annualized.
MJ (Cannabis) (<1/42): July 2nd (47 Days) 19.5 short straddle, 2.60 at the mid, 13.33% as a function of strike price, 103.5% annualized.
ARKQ (Robotics) (51/39): June 18th (33 Days)*** 79.34 short straddle, 6.75 at the mid, 8.51% as a function of strike price, 94.1% annualized.
GDXJ (Junior Gold Miners) (7/37): July 2nd (47 Days) 51 short straddle, 5.58 at the mid, 10.94% as a function of strike price, 85.0% annualized.
XME (Metals and Mining) (34/37): July 2nd (47 Days) 45 short straddle, 5.95 at the mid, 13.22% as a function of strike price, 102.7% annualized.
EWZ (Brazil) (14/37): July 2nd (47 Days) 37 short straddle, 3.50 at the mid, 9.56% as a function of strike price, 74.2% annualized.
FXI (China) (63/36): July 2nd (47 Days) 44 short straddle, 2.72 at the mid, 6.18% as a function of strike price, 48.0% annualized.
GDX (Gold Miners) (30/35): July 2nd (47 Days) 38 short straddle, 3.53 at the mid, 9.29% as a function of strike price, 72.1% annualized.
Broad Market Exchange-Traded Funds with 30-Day >20%:
IWM (Russell 2000) (16/27): July 2nd (47 Days) 221 short straddle, 15.68 at the mid, 7.10% as a function of strike price, 55.1% annualized.
QQQ (Nasdaq) (14/24): July 2nd (47 Days) 326 short straddle, 21.18 at the mid, 6.50% as a function of strike price, 50.5% annualized.
* -- For single name, the cut-off is 50% implied or greater; for broad market, 20% or greater. Broad market just tends to be less volatile than sector, which -- in turn -- tends to be less volatile than single name.
** -- There is currently no weekly contract near 45 days' duration, so using the monthly here.
*** -- As with ARKG, there is currently no weekly contract near 45 days, so using the June monthly here.
For those of you not familiar with my general process, my general order of preference is to trade (a) broad market; (b) sector exchange-traded funds; and (c) single name, in that order. If broad market isn't paying, I look at exchange-traded funds, and -- if those aren't paying -- I look at single name. This week, I think that there are opportunities to sell premium in at least sector exchange-traded funds, so I don't feel the need to delve into what single name is paying and haven't bothered to screen single name here.
In any event, I first screen out exchange-traded funds* that do not have a 30-day implied volatility of at least 35%.
Then, I price out what the 45 day at-the-money short straddle is paying as a function of strike price with the notion being that if the short straddle is paying, then most other premium selling setups I undertake will also be paying, whether it be short puts, short strangles, iron condors/flies, or short verticals/credit spreads. Here, my cut-off is generally a risk premium (credit received)/short straddle ratio of greater than 10%.
In light of this, I probably wouldn't bother playing FXI here, even though it has a 30-day implied of 36% and one that is relatively high in the range (at the 63rd percentile) because it just isn't paying enough -- 6.18% as a function of strike price. In comparison, it looks like "The Ark Complex" is paying, even though some expiry availability/liquidity makes the exchange-traded funds in this grouping less than ideal to trade.
Exchange-Traded Funds Screened for Options Liquidity and 30-Day Implied >35%:
ARKG (Genomics) (60 rank/61 30-Day): June 18th (33 Days)** 77 short straddle, 9.20 at the mid price, 11.95% as a function of strike price, 132.2% annualized.
ARKK (Innovation) (52/54): July 2nd (47 Days) 104.5 short straddle, 14.45 at the mid, 13.83% as a function of strike price, 107.4% annualized.
MJ (Cannabis) (<1/42): July 2nd (47 Days) 19.5 short straddle, 2.60 at the mid, 13.33% as a function of strike price, 103.5% annualized.
ARKQ (Robotics) (51/39): June 18th (33 Days)*** 79.34 short straddle, 6.75 at the mid, 8.51% as a function of strike price, 94.1% annualized.
GDXJ (Junior Gold Miners) (7/37): July 2nd (47 Days) 51 short straddle, 5.58 at the mid, 10.94% as a function of strike price, 85.0% annualized.
XME (Metals and Mining) (34/37): July 2nd (47 Days) 45 short straddle, 5.95 at the mid, 13.22% as a function of strike price, 102.7% annualized.
EWZ (Brazil) (14/37): July 2nd (47 Days) 37 short straddle, 3.50 at the mid, 9.56% as a function of strike price, 74.2% annualized.
FXI (China) (63/36): July 2nd (47 Days) 44 short straddle, 2.72 at the mid, 6.18% as a function of strike price, 48.0% annualized.
GDX (Gold Miners) (30/35): July 2nd (47 Days) 38 short straddle, 3.53 at the mid, 9.29% as a function of strike price, 72.1% annualized.
Broad Market Exchange-Traded Funds with 30-Day >20%:
IWM (Russell 2000) (16/27): July 2nd (47 Days) 221 short straddle, 15.68 at the mid, 7.10% as a function of strike price, 55.1% annualized.
QQQ (Nasdaq) (14/24): July 2nd (47 Days) 326 short straddle, 21.18 at the mid, 6.50% as a function of strike price, 50.5% annualized.
* -- For single name, the cut-off is 50% implied or greater; for broad market, 20% or greater. Broad market just tends to be less volatile than sector, which -- in turn -- tends to be less volatile than single name.
** -- There is currently no weekly contract near 45 days' duration, so using the monthly here.
*** -- As with ARKG, there is currently no weekly contract near 45 days, so using the June monthly here.
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