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Ironcondor

IBM IRON CONDOR (UPDATE ON BROKEN EARNINGS SETUP)This is becoming somewhat of an epic, post-earnings work-off setup. Without boring you with all the details (which are outlined in the post below), my post-earnings setup, after rolling and such is currently a Dec 7 140/143/140/143 iron condor. The 140/143 is the put wing and, yes, the 140/143 is the call wing (so it's basically inverted, with the call wing below the put wing; in short, it's an f'd-up setup). In any event, the 143 long call of that setup is nearly worthless, has done its job, so I'm going to take it off here for a .05 credit. The short call I will take off for as much I can get for it. Thereafter, I will have to roll the put side, most likely no later than Tuesday of next week, since I don't see IBM pounding above 143 (my short put strike) in short order. What I'm going to do is look to roll it out 45 DTE, but I'm going to first see what I can get for a 1 SD short call vertical at that expiry (it will be some kind of credit). Once I know what that credit is, I will look to see how much I can improve the short put side in terms of its strikes, because I don't want to pay more to roll/improve the short put side that I can receive in credit for the short call side. The unfortunate thing is that a 45 DTE will most likely be beyond IBM's next earnings announcement, so I will have to watch to see if I can take advantage of price movement/volatility around that event in order to improve the put strikes further ... .
NYSE:IBM
by NaughtyPines
EARNINGS PLAYS THIS COMING WEEK -- FDX, ORCLOnly two earnings plays stick out to me this coming week -- FDX and ORCL, both of which announce earnings on 12/16 (Wednesday) after market close, so look to put on setups before NY close on Wednesday. Currently, FDX's 52 week IVR is at 54 (IV 34), which isn't stellar, but it's at 92 for the past six months. Moreover, there is pretty good credit to be had whether you go short strangle or iron condor, so I imagine I'll play that one way or another if the IV sticks in there. ORCL (IVR 75/IV 35) isn't looking all that hot, frankly, because I can't get 1.00 in credit with either a short strangle or iron condor (a Dec 24 34.5/39.5 short strangle will only get you a .61 credit at the mid price right now, which isn't anything to go crazy over; a same expiry iron condor just isn't worth it). Nevertheless, we could see a greater volatility pop toward earnings that makes it a little bit more worthwhile such that I'll play just because there isn't that much else worthwhile to do ... . (Of course, there is that all FOMC thing next week, too).
NYSE:FDX
by NaughtyPines
ROLLING TESTED IRON CONDORS -- SOME TIPS (PART I)If you've got a few index ETF (SPY, IWM, DIA, or QQQ) iron condor trades on like I do, well, sadly, it is likely that your short call sides have been breached by this recent up move. So, what do you do? 1. Don't panic. These were defined risk trades when you put them on, and they remain defined risk, which means that your max loss is limited on the call side even if SPY keeps shooting to the moon. 2. Take off the untested side when it no longer provides any meaningful protection to the set up or roll it in the direction of the tested side. In this particular case (where the call side has been tested), look at your short put wing side. If it is now worth less than .20 ($20), consider locking in profit here and covering it or rolling it up toward the tested side, keeping the expiry the same, assuming there is sufficient time for the rolled up spread to work, and you can get sufficient credit to make it worthwhile. I generally will roll in the same expiry if the untested side is worth <.20 and there are 25 days or more until the expiration of the tested side. If you are at or near expiry (3-5 DTE), consider saving yourself some cash in commissions and fees and letting the untested side expire worthless. 3. Near expiry of the tested side (3-5 DTE), attempt to roll the tested side for duration and credit. If you can get a credit that is at least the cost of the roll and you can improve your strike prices, fantastic. Proceed to do that and sell an oppositional wing set up at or near the 1 SD. I generally like to go another 45 DTE or so with a roll or as close as possible to that to allow the trade additional time to work out. 4. If you cannot roll for duration and credit, it isn't ideal, but all is not lost. You can do one of several things: (1) close it out and take the loss; or (2) attempt to work the tested side back to scratch or profit. I generally choose the latter. I have done quite a bit of reading and video watching regarding traders' various approaches to breached iron condor setups where you cannot roll the tested side for duration and credit (i.e., generally where the tested side is not "on the dance floor"). The best idea I have found comes courtesy of TastyTrade, which advises you to roll out the tested side for duration without changing the strikes and then proceeding to sell the oppositional side against the tested side such that the end result is an iron butterfly or "iron fly." I will post an example of that separately.
AMEX:SPY
by NaughtyPines
WITH VIX/VXX CREEPING UP, PASSING ON AMZN/GOOG PLAYSAs anybody who has read my posts probably knows, I am not a big fan of earnings plays. As I have pointed out, they either go great (instant gratification) or terribly (several cycles of rolls to mitigate loss that tie up buying power). Me, I'm a bread-and-butter guy with a penchant for mechanical index ETF and TLT trades that supply a fairly constant level of theta (and so theta decay). They're awfully boring, but I don't require exciting to be successful. Consequently, I'm going to go with "boring" and passing on AMZN and GOOG earnings. Both of these juicy monsters could easily move the markets (depending on the outcome of earnings), and I simply want to keep my powder dry in the event of a volatility pop in the broader indices so that I can devote the buying power to putting on an index ETF play or two instead without risking the tie-up of buying power that an earnings play could entail. That being said, if you're going to play these, look to put on an earnings play some time tomorrow during the NY session. Due to the price of the underlying, the only way I would probably play these is via iron condor, so look to put on the short strikes of the setups at or near the 1 SD line, with your long strikes 2-3 strikes out from the shorts and take them off at 50% max profit. Naturally, both of these remain troublingly near their 52-week highs, so you might think about skewing the setups slightly bearish or making the setups "chicken wide" (wider than the 1 SD line) to avoid potential explosions/implosions that are far greater than the expected move. Good luck!
NASDAQ:GOOG
by NaughtyPines
YUM 10/6 EARNINGS PLAYYUM announces earnings on 10/6 after market close, so if you're going to play this via an options setup, look at getting a fill for whatever you put on prior to the 10/6 New York close. Ordinarily, I trade these using a short strangle or iron condor, with the short call/put legs at or around the 1 standard deviation line for the chosen expiry, which will either be the Friday immediately after the earnings announcement or the Friday thereafter if the earnings announcement is too late in the week to manage the trade post-announcement if necessary. SHORT STRANGLE: A short strangle is an undefined risk strategy that consists of selling a put and a call with the assumption that price will remain between the strikes of the put and call for the duration of the contract. Oct 16th Expiry 74.5 Short Put/89 Short Call Short Strangle 74% Probability of Profit Maximum Profit: $121/contract Buying Power Effect: Undefined Break-Evens: 73.29/90.21 IRON CONDOR: An iron condor is a defined risk strategy that consists of a long put, a short put, a short call, and long call with the assumption that price will remain between the strikes of the short put and short call for the duration of the contract. Oct 16th Expiry 72 Long Put/74.5 Short Put/89 Short Call/91.5 Long Call Iron Condor 70% Probability of Profit Maximum Profit: $57/contract Buying Power Effect: $193/contract Break-Evens: 73.93/89.57 Look to take both of these trades off at 50% max profit ... . Should price breach one side or the other of your setup, look to roll that side out to a later option expiry for credit and, if possible, for an improvement of your strike prices.
NYSE:YUM
by NaughtyPines
4
EARNINGS PLAYS I WILL BITE ON -- NFLX, GOOG & GS I have a love-hate relationship with earnings plays. When they work out, I'm happier than a clam; when they don't, I swear off them, use expletives to describe them, and say that they're a total *?! waste of time. That being said, there are some I just can't pass up, usually because the premium is just too good. In the next couple of weeks, these will be NFLX, GOOG, and GS, so I am keeping a little bit of powder dry to do those. Tips: 1. Look to put on a short strangle or iron condor prior to the close of the New York session before which the earnings announcement will occur. As a general rule, I play these nondirectionally, assuming no directional bias for the underlying and generally set up the sides at or around the 1 standard deviation line for both the call and put side. 2. Use expiries that are either the weekly options expiry immediately after the announcement or, if that provides too short a time frame in which to potentially manage the trade post-announcement, the Friday expiration thereafter. I generally prefer the weekly expiries for these setups, since they sometimes give you strikes in .50 increments, which allow you a little more precision with your strikes. 3. For both the short strangle and iron condor setups, I look to take the entire setup off at 50% max profit as volatility contracts post-announcement. 4. In the event of a test of a side of the setup, look to roll that tested side out to a later expiry for at least a credit equal to the cost of putting the trade on (fees/commissions) two to three days prior to expiry and close out the untested side or allow it to expire worthless. Additionally, attempt to improve the strike prices for the rolled out side if possible. Lastly, after rolling out the tested side, match it with an oppositional trade in the same expiration as the rolled out side (for example, if the put side is tested, roll it out to a later duration and set up a call side for that same expiry, ordinarily at or around the 1 standard deviation line for that expiry). My general rule is to roll out to the expiry that is of the shortest days until expiration that provides me with an opportunity to both roll for no additional cost in fees and commissions and that allows me to improve my strike price. If a particular expiry doesn't afford you that opportunity, try a later expiry for the roll. I'll post examples of setups in these and any other "too good to pass up" high volatility, premium selling earnings plays as we get closer to the announcements .... .
NASDAQ:AMZN
by NaughtyPines
WEEK OF 9/28: NON-EARNINGS PLAYS FOR PREMIUM SELLING OPPSAlthough we are starting back into another earnings season, I'm just not all that fond of earnings plays; I prefer the relative boredom of index ETF trades or things like sector SPDR's for the generation of steady income as opposed to flash-in-the-plan earnings plays which are generally binary in nature. They either work out quickly and dirtily or go horribly awry such that you have to devote buying power to managing a tested side post-earnings, potentially for several options cycles going forward. Since I have a play already going in OIH (current IVR at 66), I'm looking to add either index ETF trades this coming week or, in the alternative, sector ETF trades that are not correlated to what I've already got on in my portfolio and that have sufficiently high IVR so that a premium selling play is attractive. Looking at the Dough Grid with the drop-down menu set to "TastyTrade", XLV is a possible candidate, with an IVR currently at 62 ... . POSSIBLE TRADE: Nov 20th 59/61/72/74 Iron Condor POP % -- 61% Max Profit: .61 credit/contract Buying Power Effect: 1.39/contract Break-Evens: 60.39/72.61 Delta: -2.36/contract Notes: The short put side of the setup is placed around the 1 SD; the long side, at the edge of the expected move to the topside for that expiration. Due to the price of the underlying, the spread of the wings is reduced to 2 strikes, although you can certainly expand the width to 3 strikes in order to harvest more credit from the trade. I wouldn't go wider than 3, however. Look to take off the entire setup at 50% max duration. In all likelihood, the strikes may require a bit of adjustment at NY York open to accommodate overnight, broader index price movement.
AMEX:XLV
by NaughtyPines
1