ACB Long ATM StraddleCannabis stocks have the possibility to move a lot in a short period of time, as regulatory changes on whims have huge impact on the market size to which Cannabis companies can sell their products. Although our stance is that the cannabis industry is likely to become even more volatile as more regulatory developments and sector-wide shake-outs leave only the leading firms, the reason we are particularly interested in the ACB long straddle is because of the low IVR.
We are entering into a near-the-money straddle on $ACB by longing the July calls and puts with a strike of $7.50, for a $.70 debit. The breakevens are below 6.80 and above 8.20. As a long straddle, the maximum loss occurs if the stock price S is at the strike k of 7.50 at maturity in July. Taking long positions on both of these options is very cheap because the implied volatility is subdued -- with an Implied Volatility Rank of 4.3.
Also, Aurora in particular has not joined big partnerships, contrasting the alignments with Canopy Growth ($CGC) and Constellation Brands ($STZ), Cronos Group ($CRON) and Altria ($MO), Tilray ($TLRY) with Anheuser-Busch InBev (BUD) and Novatris ($NVS), and HEXO($HEXO) with Molson Coors ($TAP). Announcement of any partnership, which is likely as billionaire private equity specialist Nelson Peltz recently joined with the intent to line up possible partners, would have a huge impact on the stock price. In January, Aurora Chief Corporate Officer Cam Battley told Business Insider that he would be looking to release “hemp-derived CBD strategy” into the U.S. market in the “next few months” in January. Five months later, we still don’t know what the surprise is. It could come within the next few months.
Ivrank
XLE - (Short Premium) Selling premium into high IVR $$$Short Strangle, 20 delta (68/75 strikes), 37 'DTE, $1.07 credit
YET ANOTHER "TOTALLY HAMMERED" COVERED CALL -- CNXCNX has been totally hammered and with an IVR of 100 and an IV of 119, I can't resist a play.
100 Shares CNX at 6.61
1 Jan 15 7 short call
Total Package: 6.00 debit ($600)
Max Profit: (If Called Away at 7 -- $100, excluding fees/commissions).
GME -- EARNINGS AFTERGLOW PLAYHaving announced earnings about two weeks ago, IVR/IV in GME remains high (70/55).
The standard setup -- the short strangle:
Jan 22 27.5/38.5 short strangle
POP%: 71%
Max Profit: $113/contract
BPE: ~$333/contract
Break Evens: 26.37/39.63
Look to take it off at 50% max profit and move on ... .
WYNN -- NONEARNINGS PREMIUM SELLING PLAYSome stuff hits my high IVR/high IV radar over and over again. WYNN is one of those, with an IVR currently at 100 and an IV at 81.
Some caution is in order, though, since ordinarily I like going 45 days out and WYNN's earnings are due to be announced on 2/2, so I want any setup to expire somewhat before that so I don't get caught in a volatility expansion (that being said, how much more can it expand?).
Here's the setup (which I'll look to take off somewhat in advance of expiry), since it's getting in a bit tight to earnings:
Jan 22nd 45/77 short strangle
POP%: 79% (ridiculous, quite frankly for a play that is nearly worth 2.00 in credit)
Max Profit: $196/contract
BPE: ~$615
BE's: 43.04/78.96
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).
HYG -- PREMIUM SELLING PLAYYou know what they say, one's man's junk is another man's treasure ... . With an IVR of 100 and an IV of 18, this may be as good as junk is going to get for premium selling (don't quote me on that; further sell-off could be on the horizon ... ).
HYG Jan 29 74/84 short strangle
POP%: 75%
Max Profit: $109/contract
BPE: ~ (Undefined/After Hours)
BE's: 72.91/85.09
HES -- POST EARNINGS HIGH VOL PLAYWith a dwindling earnings calendar and some buying power to put to good use, I'm looking to go where the IVR/IV takes me. With an IVR of 74 and fairly decent IV of 43, HES popped up toward the top of the Dough "Notable Stocks" grid (sorted by IVR).
Here's my set up:
Dec 24 51/68 Short Strangle
POP%: 75%
Max Profit: $150/contract
BPE: ~$597/contract
BE's: 49.50/69.50
Notes: The underlying isn't the most liquid thing, so you may not get a fill at this particular price and might have to monkey around with it a bit. Me, I'm just going to enter the order and if it fills, it fills. If it doesn't, I'll look at it again next week to still if there's still premium in the play. As always, I'll look to take the trade off at 50% max profit so I can redeploy the capital elsewhere.
