THE WEEK AHEAD: M EARNINGS; OIH, XOP, ASHR, FXI, IBB PREMIUM
I'm personally not doing a ton here with May opex a mere week away and June at 40 days until expiry, which is a smidge short of that 45 day wheel house I like to use for putting on plays. However, there is "stuff" to do if you're so inclined ... .
M (71/54) announces earnings on Wednesday before market open, so you'll want to shoot for a fill on whatever you do on Tuesday before market close. Pictured here is a fairly Plain Jane June 21st 20/25 directionally neutral short strangle paying 1.08 at the mid price with break evens of 18.92/26.08 and delta/theta metrics of -2.51/2.84. With May opex options having an implied of 88.9% versus June's 49.6%, we're looking at a fairly big volatility crush post-earnings ... .
Macy's has been hammered (it's within 5% of its 52-week low of 22.11), so I could also see the attractiveness of just going purely directional here. The June 21st 22 short put is paying 1.34 with a cost basis of 20.66 in shares if assigned (an 8% discount over current price). It pays an annualized dividend of 1.51 -- a 6.65% yield -- with the last quarterly divvy of .37 being distributed on 4/1 with a record date of 3/15 (i.e., you want to get into shares before 6/15 or so if you want to grab the next dividend).
On the exchange-traded fund front, here are the top five ordered by rank -- ASHR (74/32), GDXJ (51/28), FXI (50/23), IBB (46/26), and EFA (44/14), and the top five ordered by 30-day: OIH (37/34), XOP (29/33), ASHR (74/32), EWZ (25/32), and XBI (39/32). If I was going to be picky here, I'd probably wait for more ideal rank/30-day metrics (>50/>35), but ASHR approaches those metrics, even though it falls short of the 30-day 35% mark by a touch.
Here are some ASHR setups that might be worth looking at:
The June 21st 23/26/28/31 Iron Condor: It's almost so narrow in the body as to approach an iron fly, but it's the only way you'll get one-third the width of the wings out of a defined risk setup without going full-on fly. Paying 1.09 at the mid price (.54 at 50 max), it's got expected move break evens and a delta/theta metric of -3.20/1.27.
The June 21st 27 Short Straddle: Paying 2.20 at the mid price (.55 at 25 max), break evens at 24.80/29.20, delta/theta of -5.22/2.70.
Alternatively, there is the more liquid FXI (50/23). Although you'll have to put up with a lower 30-day, you can be more surgical since market makers have been kind enough to provide half-dollar strikes even in the monthly 40 days out.
The June 21st 37.5/40.5/43.5/46.5 pays 1.01 with break evens wide of the expected move at 39.49/44.51 and delta/theta numbers of -2.69/1.36.
The June 21st even-striked 40/44 short strangle pays 1.02 with more forgiving break evens at 38.98/45.02 and delta/theta figures of 2.06/2.58.
M (71/54) announces earnings on Wednesday before market open, so you'll want to shoot for a fill on whatever you do on Tuesday before market close. Pictured here is a fairly Plain Jane June 21st 20/25 directionally neutral short strangle paying 1.08 at the mid price with break evens of 18.92/26.08 and delta/theta metrics of -2.51/2.84. With May opex options having an implied of 88.9% versus June's 49.6%, we're looking at a fairly big volatility crush post-earnings ... .
Macy's has been hammered (it's within 5% of its 52-week low of 22.11), so I could also see the attractiveness of just going purely directional here. The June 21st 22 short put is paying 1.34 with a cost basis of 20.66 in shares if assigned (an 8% discount over current price). It pays an annualized dividend of 1.51 -- a 6.65% yield -- with the last quarterly divvy of .37 being distributed on 4/1 with a record date of 3/15 (i.e., you want to get into shares before 6/15 or so if you want to grab the next dividend).
On the exchange-traded fund front, here are the top five ordered by rank -- ASHR (74/32), GDXJ (51/28), FXI (50/23), IBB (46/26), and EFA (44/14), and the top five ordered by 30-day: OIH (37/34), XOP (29/33), ASHR (74/32), EWZ (25/32), and XBI (39/32). If I was going to be picky here, I'd probably wait for more ideal rank/30-day metrics (>50/>35), but ASHR approaches those metrics, even though it falls short of the 30-day 35% mark by a touch.
Here are some ASHR setups that might be worth looking at:
The June 21st 23/26/28/31 Iron Condor: It's almost so narrow in the body as to approach an iron fly, but it's the only way you'll get one-third the width of the wings out of a defined risk setup without going full-on fly. Paying 1.09 at the mid price (.54 at 50 max), it's got expected move break evens and a delta/theta metric of -3.20/1.27.
The June 21st 27 Short Straddle: Paying 2.20 at the mid price (.55 at 25 max), break evens at 24.80/29.20, delta/theta of -5.22/2.70.
Alternatively, there is the more liquid FXI (50/23). Although you'll have to put up with a lower 30-day, you can be more surgical since market makers have been kind enough to provide half-dollar strikes even in the monthly 40 days out.
The June 21st 37.5/40.5/43.5/46.5 pays 1.01 with break evens wide of the expected move at 39.49/44.51 and delta/theta numbers of -2.69/1.36.
The June 21st even-striked 40/44 short strangle pays 1.02 with more forgiving break evens at 38.98/45.02 and delta/theta figures of 2.06/2.58.
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