THE WEEK AHEAD: MU, BBBY EARNINGS; XOP, GDXJ, SLV, EWZ, KRE, XLEEARNINGS ANNOUNCEMENT VOLATILITY CONTRACTION PLAYS:
MU (27/57/10.8%)*, announces Tuesday after market close.
BBBY (32/105/20.2%), announcement Thursday before market open.
Pictured here is an MU October 16th 44/55 short strangle, paying 1.52 as of Friday's close (.76 at 50% max).
For those of a defined risk bent: the MU October 16th 40/45/52.5/57.5 iron condor was paying 1.74 at the mid as of Friday's close, (.87 at 50% max).
For BBBY, I'd probably go short straddle, skinny short strangle, or skinny iron condor with the October 16th 14/15 skinny short strangle paying 2.46 as of Friday's close (.62 at 25% max), and the October 16th 10/14/15/19 4-wide paying 2.02 (.51 at 25% max) with risk one to make one metrics.
OPTIONS LIQUID EXCHANGE-TRADED FUNDS SCREENED FOR >35% 30-DAY IMPLIED AND RANKED BY PERCENTAGE THE NOVEMBER (56 DAY'S) AT-THE-MONEY SHORT STRADDLE IS PAYING AS A FUNCTION OF STOCK PRICE:
XOP (16/54/17.8%)
GDX (22/54/17.0%)
SLV (39/48/14.4%)
EWZ (19/44/14.1%)
GDX (21/43/14.1%)
XLE (26/41/13.5%)
SMH (24/40/11.3%)
BROAD MARKET:
QQQ (33/34/10.9%)
IWM (31/34/10.6%)
SPY (21/26/8.3%)
EFA (22/24/7.1%)
DIVIDEND GENERATORS FOR THE IRA SCREENED FOR THOSE WHERE THE NOVEMBER AT-THE-MONEY SHORT STRADDLE IS PAYING >10% OF STOCK PRICE:
SLV (39/48/14.4%)**
EWZ (19/44/14.1%)
KRE (27/44/14.2%)
XLE (26/41/13.5%)
MUSINGS:
With the major binary event of the year approaching (U.S. general elections), I'll be attempting to resist the urge to trade in the margin account and will flatten that completely running into the October monthly expiry. The intent was to wind that account up prior to year end, so now is as good a time as any.
With retirement approaching, my medium to long-term focus will be turning to IRA trades in a cash secured environment, with the focus on exchange-traded-funds with dividends and the general go-to strategy being short put, acquisition, and covering, resorting to highly liquid single name only in the event that sector and broad market volatility totally dry up. I'll continue to grind on those broad market/exchange-traded fund trades through the election as long as volatility hangs in there, naturally keeping some powder dry in the event that a high volatility event presents itself. This basic approach has worked well over the years, and I see no particular reason to change it now, even though it has zero sexiness and can be slow going, particularly if you're not the patient type.
My current stock positions are in SPY (covered call), TLT (covered call), IYR (covered call), and EFA (covered call). In addition, I've got short puts or short put ladders deployed in QQQ, IWM, SPY, SLV, EWZ, KRE, XLE, GLD, and HYG.
Previously, I was hesitant to dump my stock positions or allow them to be called away due to their paying dividends, but may change my tune, particularly with SPY, where the dividend is a paltry 1.76% relative to what the 30-day 2 x expected move short put is paying currently. Naturally, what a given option will pay will depend on where the implied volatility is at the given moment, but here the 2 x expected move short put nearest 30 days is the October 26th 305, paying 2.60 or .86% ROC at max (10.32% annualized).
The basic question is whether it's generally worth it to hang out in shares when you don't have to, even if you're getting a little extra something something if you've covered.*** Short puts, after all, make money regardless of whether the stock goes up or sideways and can even make money if the market goes down, assuming that your break even isn't broken; stock only makes money if it goes up. Short puts can be rolled to reduce cost basis further; once you're in stock, you're married to the position.
I guess I'm trying to talk myself into allowing my shares to be called away ... . :-)
* -- The first metric is the implied volatility rank (i.e., where 30-day implied is relative to where it's been over the past 52 weeks); the second, 30-day implied volatility; and the third, the percentage the October at-the-money short straddle is paying as a function of stock price.
** -- Neither SLV nor GLD pay a dividend.
*** -- The 2 x expected move short call nearest 30 days is the October 26th 346, paying 1.56 or 18.72 annualized, which also far exceeds what you'll receive in SPY dividends on an annual basis (currently 5.681/share or $568.10 per year for a one lot).
MU
MU: Micron Keeps Moving Up - Possible TargetsMicron chart keeps rallying towards its earnings day on 09/29/2020 (confirmed). Trading at $47.80, the price is close to its second target of $48.13 (50% Fib level). Potential higher targets are at $51.46 (78.6%) and $54 (100%) levels.
Scenario analysis: ADP employment numbers to be reported on Sept 3rd may help with further short-term price advancement, if positive. However, September has been a volatile month historically. A broader pull back in major indices is possible between next week and end of this month. If such correction occurs, MU chart may pull back as well, possibly down to $44 level, to resume its rally toward price levels above $50 with general market move higher in October - November time frame. If MU chart makes its way to $51 level before the earnings, that could be a good opportunity to book the profits and reassess possible price movements at that time.
MU: SOXL: Micron is Moving HigherMU: Micron has started its rally toward Q3 - next earnings season. The chart has reached $45.06, its 23.6% Fib retracement level, which may serve as near-term resistance, or consolidation zone before its next leg up. Momentum has turned positive as MACD has crossed to the upside on all time frames. There are two unfilled gaps below, at $43.76 and $42.68 levels. Next possible targets for the move higher are $48.13 (50%), $51.46 (78.6%), and $54 (100%). Pull backs on the way up are possible and are likely to represent a buying opportunity.
THE WEEK AHEAD: MU, FDX EARNINGS; XOP, IWM, EWZEARNINGS:
MU (36/64/11.7%) announces earnings on Monday after the close. Pictured here is a 19 delta short strangle in the July expiry, paying 1.55.
FDX (46/59/11.4%) announces Tuesday after the close, with the 20 delta July 17th 115/147 paying 4.56.
EXCHANGE-TRADED FUNDS ORDERED BY RANK AND SCREENED FOR 30-DAY >35%:
EWW (59/44/12.6%)
EWZ (47/63/17.7%)
XLE (45/52/16.0%)
GDXJ (43/60/17.7%)
SMH (37/42/12.0%)
GDX (36/45/14.5%)
XOP (32/70/20.2%)
USO (13/67/16.7%)
Would probably go out to August here (54 days) ... . Looked at through the lens of what the short straddle is paying as a function of share price, it looks like I should be selling premium in XOP (20.2%), followed by EWZ (17.7%) and/or GDXJ (17.7%).
BROAD MARKET ORDERED BY RANK:
IWM (57/45/12.7%)
QQQ (38/32/<10%)
EFA (37/29/<10%)
SPY (37/34/<10%)
Small caps continue to be where the juice is at.
IRA DIVIDEND-GENERATORS
IYR (53/40/11.7%)
XLU (50/33/<10%)
EWZ (47/63/17.7%)
EWA (46/40/11.2%)
EFA (37/29/<10%)
SPY (37/34/<10%)
HYG (35/20/<10%)
EMB (20/18/<10%)
TLT (20/19/<10%)
EWZ offers both better better premium as a function of stock price than IYR at the moment, as well as slightly higher yield (3.66% for the former; 3.50% for the latter). Since I've already laddered out IYR, I may dip at the EWZ well with the 16 delta short put paying .70 in August at the 22 strike, .84 in September at the 21 ... .
MU BULLERISH Earnings playMU is in a clear ascending channel, has set up meaningful resistance at the $48 level last week. Looks like it has consolidated at the lower end of the channel and is going to make a move up to the top of the channel. This has set up an opportunity to the long side if MU respects the channel it is in. Monday is earnings for MU after market close, I'm not really sure what it is expected and how they have been doing,a few weeks ago I played the $50 breakout successfully, it ran to 54 where I closed the trade.
This chart presents two trade setups because of the positioning of the stock and the underlying catalyst for a move to either direction.
Bullish: MU price target is $54 upon good earnings as a catalyst to move the stock from the lower end of channel to the higher end of the channel, I'll be playing Jul 31 - Aug 07 options as the longest up move from the lower end of the channel took 24 days to complete.
Side note: MU has earnings on Monday after market close, this means that IV will be extremely high on Monday and might not be worth buying options until after earnings. I have already started a position with Jul 17th options, which I will most likely close at the end of day Monday if MU makes a good move off the lower channel because of IV crush the next day and will re enter if indeed the lower of the channel is respected and the stock moves higher on earnings.
Bearish: If MU breaks that lower end of the channel, it could possibly break down and head lower or bad earnings or even good earnings that did not meet expectation. This entry will be based on whether MU holds that $48 level or not, if not could profit really nicely to the downside with options as well, as put options tend to gain more as vol increases (it mostly increases as the stock goes down)
This is not FINANCIAL ADVICE and SHOULD NOT be taken as a trade just based on what I have put out here. Do your own analysis and use mine as supplementation to support your thesis, mine is strongly to the upside more than to the down side and I have a clear plan as to how I will execute with technical and time stops. OPTIONS ARE NOT FOR EVERYONE, check with your broker or financial adviser first.