THE WEEK AHEAD: GE, CSX, PYPL EARNINGS; MBI, P
EARNINGS
GE announces earnings on 10/20 (Friday) before market open. With a background implied volatility in high 20's (28% as of Friday close), it isn't particularly high from a premium selling standpoint, but I could see this as a potential acquisition opportunity via a November 17th 22 short put (paying .32 at the mid), in spite of the fact that the company's being a decent dividend bearing play is waning. Alternatively, the November 17th 22 short straddle pays 1.37 at the mid. Going pure volatility contraction play closer in time doesn't pay all that much, with the October 27th 22 short straddle brining in short of 1.00 at the mid.
CSX announces on Tuesday before market open. Background implied volatility's in the mid-30's which places it in the upper fourth percentile of where it's been over the past year. The October 27th 51/55 short strangle's paying 1.24 at the mid, with the comparable defined risk iron condor at 48/51/55/58 paying .92.
PYPL, with a background implied around 30 goes on 10/19 (Thursday) after market close, with the Oct 27th 65.5/71.5 short strangle paying 1.55, and the delta neutral 62.5/65.5/71.5/74 iron condor in the same expiry paying .95.
NON-EARNINGS
MBI, with a background implied of 66 (at the very high end of its range), probably only makes sense as a short put/acquire/cover cycle trade, with the November 17th 6 short put paying .35 at the mid and the 7 paying .76. The former would yield a cost basis of 5.65 on assignment; the latter, 6.24.
P has a background implied of 67 (mid-range over the past year), with the December 1st 7 short put paying .27 (cost basis of 6.73 if assigned) and the at-the-money 8 paying .66 (7.34 cost basis on assignment).
VIX/VIX DERIVATIVE TRADES
Currently, no term structure or contango drift trades are in the offing. The first VIX future trading at >16 is way out in May, and the VIX/VXST ratio finished Friday's session at around .84.
GE announces earnings on 10/20 (Friday) before market open. With a background implied volatility in high 20's (28% as of Friday close), it isn't particularly high from a premium selling standpoint, but I could see this as a potential acquisition opportunity via a November 17th 22 short put (paying .32 at the mid), in spite of the fact that the company's being a decent dividend bearing play is waning. Alternatively, the November 17th 22 short straddle pays 1.37 at the mid. Going pure volatility contraction play closer in time doesn't pay all that much, with the October 27th 22 short straddle brining in short of 1.00 at the mid.
CSX announces on Tuesday before market open. Background implied volatility's in the mid-30's which places it in the upper fourth percentile of where it's been over the past year. The October 27th 51/55 short strangle's paying 1.24 at the mid, with the comparable defined risk iron condor at 48/51/55/58 paying .92.
PYPL, with a background implied around 30 goes on 10/19 (Thursday) after market close, with the Oct 27th 65.5/71.5 short strangle paying 1.55, and the delta neutral 62.5/65.5/71.5/74 iron condor in the same expiry paying .95.
NON-EARNINGS
MBI, with a background implied of 66 (at the very high end of its range), probably only makes sense as a short put/acquire/cover cycle trade, with the November 17th 6 short put paying .35 at the mid and the 7 paying .76. The former would yield a cost basis of 5.65 on assignment; the latter, 6.24.
P has a background implied of 67 (mid-range over the past year), with the December 1st 7 short put paying .27 (cost basis of 6.73 if assigned) and the at-the-money 8 paying .66 (7.34 cost basis on assignment).
VIX/VIX DERIVATIVE TRADES
Currently, no term structure or contango drift trades are in the offing. The first VIX future trading at >16 is way out in May, and the VIX/VXST ratio finished Friday's session at around .84.
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