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ASHR

THE WEEK AHEAD: HD, HPQ EARNINGS; ASHR, GDXJ, EEM PREMIUMEARNINGS: HD (33/24) announces earnings on Tuesday before market open; HPQ (68/38), Thursday after market close. Although the rank/implied metrics are less than stellar, pictured here is an HD June 21st 180/185/200/205 iron condor paying 2.13 (1.06 at 50 max), expected move break evens, and delta/theta metrics of -2.22/2.96. Alternative Trades: June 21st 180/205 short strangle, 2.48 credit (1.24 at 50 max), one standard deviation move break evens, 4.33/9.35 delta/theta metrics. HPQ is a bit hard to work with given its size, which imply that the only way you'll get paid to play is via short straddle. The June 21st 19 is paying 1.60 (.40 at 25 max), with expected move break evens and delta/theta metrics of -5.00/2.23. Alternative Trades: June 21st 18 short put (bullish assumption; potential acquisition play), .45 credit, 29.78 delta, cost basis of 17.55 if assigned (a 7.9% discount over where the stock was trading at Friday close). EXCHANGE-TRADED FUNDS SORTED BY RANK/IMPLIED Top 5 By Rank: ASHR (57/30), GDXJ (50/28), EEM (41/21), GDX (40/34), SMH (37/29). Top 5 By Implied: OIH (34/34), EWZ (27/34), XOP (22/31), XBI (35/31), ASHR (57/30). We're a bit close in time for June setups (33 days) and a bit far out for July (61), so would probably wait until the July monthly is closer in time in the absence of absolutely desperation to pile on theta to burn ... .
NYSE:HD
by NaughtyPines
3
THE WEEK AHEAD: M EARNINGS; OIH, XOP, ASHR, FXI, IBB PREMIUMI'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.
NYSE:M
by NaughtyPines
3
THE WEEK AHEAD: NFLX, IBM EARNINGS; ASHR, GDXJ, XOP, EWZEARNINGS: NFLX and IBM both announce on Tuesday after market close, so look to put on something in the waning hours of Monday's session if you're going to do a volatility contraction play. Pictured here is a NFLX (42/46) 25/10 iron condor,* with the short option strikes at the 25 delta; the longs at the 10 (as of Friday close). Metrics: $825 max profit; $1675 max loss; 24.6% return at 50% max; break evens wide of the expected move at 311.75/393.25, delta -.74, theta 16.21. Potential volatility contraction from the nearest weekly (April 18th: 78.6%) to the May expiry (44.2%) appears to be in the neighborhood of 40%. The wings can naturally be narrowed to generate a softer buying power effect (e.g., the 310/320/385/395 pays 4.18 ($418) with a max loss/buying power effect of 5.82 ($582), -.45 delta, 6.48 theta and with break evens still wide of the expected). IBM (67/29): The May 17th 130/135/155/160 is paying 1.50 at the mid with fairly wide markets and pesky strike availability in the May cycle where you'd ordinarily want to pitch your tent. On check on a similarly delta'd setup in the New York session, I'd pass if you can't filled with a fairly delta neutral setup for at least one-third the width of the wings. Potential volatility contraction from the nearest weekly (April 18th: 53.9%) to the following monthly (May 17th: 28.4%) looks to be fairly decent at around 45%. THE EXCHANGE-TRADED FUND FRONT Top of the List: ASHR (53/29), GDXJ (33/28), OIH (27/31), XLV (24/14), GDX (21/22), XOP (20/30), and EWZ (18/32). We're kind of mid-cycle here with May being a tad short (33 days) and June being a tad long (68 days), so would probably wait to put something on until June comes more into view. Since I don't have anything on in EWZ currently, I might make an exception there. The May 17th 26 delta 38/43 short strangle is paying 1.19, with break evens wide of the expected move at 36.81/44.19, delta -.16, theta 3.6. BROAD MARKET With VIX finishing the week at a penny north of 12, we could be in for a long, dry summer of premium selling (who knows, really). A good time to dry powder out and keep it dry for the next uptick in volatility ... . * -- There is some research in support of the notion that 25/10's more closely emulate short strangle performance over a large number of occurrences; this is naturally intuitive, since you're paying less for the longs, bringing in more credit, and therefore generating more favorable break evens over a tighter winged setup.
NASDAQ:NFLX
by NaughtyPines
5
THE WEEK AHEAD: HAND SIT ON PREMIUM SELLINGAlthough VIX finished the week above the low volatility environment zone (<15) at 16.48, not much is enticing here from a premium selling standpoint at first glance. Earnings announcements are now down to a trickle, with the next quarter's announcements coming into range in the May cycle, militating in favor of putting on earnings-related volatility contraction plays closer to announcement since implied will in all likelihood expand running into them. ASHR (50/29), GDXJ (44/27), GDX (35/24), TLT (36/10), XLB (33/19) round out the top five exchange-traded funds sorted by rank; EWZ (12/38), XOP (26/32), OIH (27/32), ASHR (50/29), and USO (14/28) when sorted by 30-day implied, all below the >50/35 metrics I like to see out of these to put plays on, although I will continue to sell a bit of XOP premium here, since it's 30-day implied is nearly twice that of SPY's at the moment: the May 17th 30 short straddle's paying 2.99 (.75 at 25% max), nearly 10% of the Friday close share price of 30.06. On the majors end of the stick: SPY (28/16), QQQ (23/20), DIA (22/17), and IWM (19/21) -- all at the low end of their 52-week volatility ranges.
AMEX:ASHR
by NaughtyPines
THE WEEK AHEAD: NIO EARNINGS; XOP, EWZ PREMIUM SELLINGMy screeners aren't showing me a ton of things for either earnings-related volatility contraction plays and/or just Plain Jane premium selling, so I'm largely looking just to work what I have on, do any adjustments that are necessary, and wait for a higher volatility environment (VIX is at sub-15 here) to deploy capital back into premium selling. The Chinese "Tesla killer" NIO (82/136) announces in two days and with a background implied clocking in at 136, who can resist putting something on. Pictured here is a fairly delta neutral 11 Short Straddle in the April expiry that is paying a whopping 4.18 at the mid (1.04 at 25% max) with break evens that encompass most of the underlying's whole data set -- 6.82 to 15.18. Even skewed to the call side, the net delta is -2.59 with a theta metric of 4.08. Obvious alternative plays: April 18th 7/11/11/15 iron fly: 3.10 at the mid, max loss of .90 versus max profit of 3.10 (.78 at 25% max), delta -.97, theta 1.43. I would note the rarity of the substantially better than risk one to make one metrics of this setup. April 18th 7 short put, .72 at the mid with a downside break even of 6.28. On the exchange-traded fund front, the vast majority of underlyings are at the very low end of their 52-week ranges, with the highest implied underlyings in XOP (16/30) and EWZ (10/30), which again militates in favor of not putting on a ton of nondirectional premium selling stuff here. I did look at ASHR, which did stick out at 75/34, but the options chains in April, May, and July have wanky strikes (i.e., the April 28th 27.71 (WTF?) short straddle), and I don't like having to roll from "wanky" to an even Steven strike if I have to. If I'm going to play China, it's going to be in the more liquid FXI (16/21), which doesn't suffer from similar oddities that make trading it potentially harder than it has to be.
NYSE:NIO
by NaughtyPines
A-Share dilemma - break of trend or meteroic rise?Looking at the long-term trend, the Chinese A-shares are trading within a pretty well defined range since the mid 1990's. This includes two meteroic bubbles that have risen as quickly as they've crashed. Despite these bubbles forming, they haven't caused any massive damage to the Chinese economy such as what we saw when other large bubbles broke down (such as Japan's 1980's bubble, or the US dotcom bubble). Interestingly, each time the trend hit the lower end of the range, we've seen the a-shares shoot up meteroically. Fundamentally, I'm rather bearish on the Chinese market right now. They have an insane debt bubble combined with the news events coming from "trade war" problems. Most of the bubbles in the Shanghai Composite have come as a result of the Chinese govt's constant injections of liquidity and easing. This provides a window into a view of the debt bubble. Recently, the lower end of the range was once again just hit, and we also have come to learn that the Chinese gov't is already back to monetary easing through various means. Based on history, you would think we may see another meteoric rise in the Shanghai composite index, but I'm not sure that will happen this time around. China is painted into a more difficult corner this time around, and they are more wary about stock bubbles like this nowadays. I think given the fundamental picture, we're more likely to break the long-term trend downward. If the debt bubble does in fact burst, this will certainly be the case. With that said, I think it may be prudent to buy some deep OTM leap calls on the Shanghai Composite (you can use the ETF $ASHR) to capitalize on a potential blowoff bubble formed from more easing once again.
SShort
by GTStockmaster
1