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THE WEEK AHEAD: AAL, TSLA, SNAP, NFLX EARNINGS; XOP, GDXJ, SLVEARNINGS: Got a bunch of potentially worthwhile, earnings announcement volatility contraction plays on tap this coming week. Here there are, ordered by "bang for your buck": AAL (29/99/19.7%), announcing Thursday before market open: Due to its size, I would probably go short straddle or iron fly, with the November 20th 12 short straddle paying 2.46 (19.7% as a function of stock price), and the November 20th 8/12/12/16 four-wide iron fly, paying 2.00 even. TSLA (29/79/19.1%), announcing on Wednesday after market close. Pictured here is a 10-wide iron condor, with the short option legs set up at the 20 delta. Markets are showing wide in the after hours, but would adjust strikes as necessary to get at least one-third the width of your wings in credit (i.e., 3.33 for a 10 wide, 1.67 for a five, etc.). SNAP (35/97/17.2%), announcing Tuesday after market close. The November 20th 19 delta 24/35 short strangle was paying 1.35 at the mid price, with the defined risk 22/25/33/36 iron condor paying 1.11. NFLX (43/62/14.3%), announcing on Tuesday after market close. The November 20th 455/465/635/645 was paying 3.91 at the mid price as of Friday close. As with the TSLA defined risk play, look to adjust strikes as necessary to get at least one-third the width of your wings in credit. EXCHANGE-TRADED FUNDS, RANKED BY PERCENTAGE OF STOCK PRICE THE NOVEMBER AT-THE-MONEY SHORT STRADDLE IS PAYING AND SCREENED FOR THOSE PAYING GREATER THAN 10%: XOP (14/55/13.1%) GDXJ (18/49/12.6%) SLV (39/50/11.2%) XLE (26/45/10.2%) EWZ (15/42/10.0%) BROAD MARKET: QQQ (33/35/8.0%) IWM (29/33/7.2%) SPY (23/27/5.8%) EFA (18/22/4.6%) IRA DIVIDEND EARNERS, RANKED BY PERCENTAGE OF STOCK PRICE THE NOVEMBER AT-THE-MONEY SHORT STRADDLE IS PAYING AND SCREENED FOR THOSE PAYING GREATER THAN 10%: SLV (39/40/11.2%)* XLE (26/45/10.2%) KRE (24/43/10.1%) EWZ (15/42/10.1%) MUSINGS: 16 days left until the general election. Out of an abundance of caution, I'm not adding anything here, but may do some "window dressing" rolls of my IWM and QQQ shorts puts I have on in the November 20th expiry just to lock in realized profit, and I'll do an educational post as to what that would entail. Handsitting, thumb twiddling while the markets do their thing is the hardest part ... . * -- Neither SLV nor GLD pay a dividend.
NASDAQ:TSLA
by NaughtyPines
5
THE WEEK AHEAD: UAL, DAL, SLB, WBA EARNINGS; XOP, SLV, QQQEARNINGS: There are four options highly liquid underlyings that pop up on my screener for next week with 30-day implied of >50%: UAL (23/88/22.6%)* (on Wednesday after market close); DAL (13/74/19.1%) (Tuesday before market open); SLV (18/59/16.4%) (Friday, before market open), and WBA (43/54/12.2%) (Thursday, before market open). Pictured here is a directionally neutral 29/50 short strangle in the November monthly with the options camped out at the 16 delta, yielding a 2 x expected move break even on the put side and > 2 x expected move on the call. Delta/theta -.41/6.00; paying 1.87 at the mid price as of Friday close (.94 at 50% max). The DAL November 20th, 16 delta 27/42 short strangle was paying 1.83 at the mid price as of Friday close; delta/theta 1.48/4.39. SLB is small enough to short straddle, but would go "skinny," as the November only has 2.5 wides to play with. The November 20th 15/17.5 was paying 1.48 as of Friday close, but treating it as a short straddle and taking profit at 25% max (.37) isn't particularly compelling, so would probably pass on the play and deploy buying power elsewhere. WBA suffers from a similar affliction (2.5 wides out in November), but the 32.5/40 is paying 1.54 there, albeit with break evens greater than the expected move, but not quite 2 x. EXCHANGE-TRADED FUNDS RANKED BY PERCENTAGE OF STOCK PRICE THE NOVEMBER AT-THE-MONEY SHORT STRADDLE IS PAYING AND SCREENED FOR THOSE PAYING >10%: XOP (15/56/14.5%) SLV (45/51/13.1%) GDXJ (15/49/12.9%) EWA (15/42/11.6%) XLE (27/43/11.2%) GDX (15/40/10.7%) XBI (29/43/10.3%) USO (4/43/10.1%) BROAD MARKET RANKED BY PERCENTAGE OF STOCK PRICE THE NOVEMBER AT-THE-MONEY SHORT STRADDLE IS PAYING: QQQ (28/33/8.2%) IWM (25/32/7.6%) SPY (19/25/5.9%) EFA (13/20/4.8%) DIVIDEND PAYERS RANKED BY PERCENTAGE OF STOCK PRICE THE NOVEMBER AT-THE-MONEY SHORT STRADDLE IS PAYING AND SCREENED FOR THOSE PAYING >10%: KRE (25/44/11.7%) EWZ (15/42/11.6%) XLE (27/43/11.2%) GENERAL MUSINGS: I already have a UAL covered call on, so am unlikely to partake in that underlying further here. Moreover, in the IRA/retirement account, I'm already deployed in everything at the top of the heap from an implied volatility standpoint, although I may carry on with my standard weekly 16-delta short put in the broad market instrument with the highest implied volatility, which would be QQQ. Alternatively, I'll do a QQQ 10-percenter (See Post Below) instead, as NDX isn't fantastically liquid, and a November 27th (currently, 48 days until expiry) will be available. To emulate a 50-wide, however, in NDX, I'll have to go 10-wide with 5 contracts or 5 wide with 10, etc. For example, the November 27th 240/245 is paying .50, and I'd have to sell 10 of those to emulate the NDX November 27th 9925/9975, paying 5.04. I would naturally prefer just selling one NDX spread, since it means fewer fees, but if the bid/ask is grotesque, I'll just have to go with QQQ or a RUT 50 wide. (The RUT November 27th 1385/1435 was paying 5.04 at the mid as of Friday close). * -- The first metric is the implied volatility rank (where implied volatility is currently relative to where it's been over the last 52 weeks); the second, 30-day implied volatility; and the third, what the November at-the-money short straddle is paying as a percentage of stock price.
NASDAQ:UAL
by NaughtyPines
THE WEEK AHEAD: DAL, CCL EARNINGS; GDXJ/GDX, SLV, KREEARNINGS: CCL (28/88/25.9%) and DAL (18/77/22.1%)* announce earnings on Thursday. The DAL November 20th 21 delta, 2 x expected move 26/41 short strangle is paying 2.41 or 7.6% as a function of stock price (1.20 at 50% max; 3.8% as a function of stock price). I've pictured a short put here as the simplest play to get in on a sector that has been hammered by the pandemic, assuming you don't mind potentially being assigned at that price to work a longer-term play (i.e., covered calls). CCL is small enough to play via short straddle, with the November 20th 15 short straddle paying 3.92 or 25.9% as a function of stock price (.98 at 25% max; 6.5% as a function of stock price). Alternatively, the > 2 x expected move 10/20 short strangle is paying .93 (.46 at 50% max; 3.0% as a function of stock price). EXCHANGE-TRADED FUNDS WITH >35% 30-DAY IMPLIED RANKED BY PERCENTAGE THE NOVEMBER AT-THE-MONEY SHORT STRADDLE IS PAYING AS A FUNCTION OF STOCK PRICE: TQQQ (41/103/30.2%) XOP (19/60/17.3%) USO (10/55/146%) GDXJ (20/50/15.1%) SLV (39/48/13.5%) EWZ (21/46/14.1%) XLE (30/44/131%) XBI (36/45/13.0%) GDX (19/42/12.7%) SMH (27/47/11.2%) QQQ (35/35/10.5%) BROAD MARKET: QQQ (35/35/10.5%) IWM (32/34/9.8%) EFA (25/22/9.0%) SPY (21/26/8.0%) IRA DIVIDEND EARNERS/PREMIUM SELLING: KRE (28/47/13.6%) (Current Yield: 3.83%) SLV (39/48/13.5%) (No Yield; Precious Metals Position) EWZ (21/46/14.1%) (Current Yield: 3.80%) XLE (30/44/13.1%) (Current Yield: 7.52%) XBI (36/45/13.0%) (Current Yield: .35%; Premium Selling Play) SMH (27/47/11.2%) (Current Yield: 0.00%; Premium Selling Play) QQQ (35/35/10.5%) (0.60% Yield; Premium Selling Play) MUSINGS: With the general elections now 29 days away, I'm not doing much here in terms of adding new positions. With the margin account in particular, I'm looking at going completely flat at or near October opex and then watching the show from the sidelines. On the IRA/retirement account front, I'm already in most of the underlyings at the top of the implied volatility ladder, so don't anticipate doing much here anyway. I will naturally look at delta on a portfolio-wide basis to see whether I need additional delta one way or the other to make myself less directional running into the elections. We could, after all, conceivably see one of a variety of things depending on how things play out (i.e., relief rally, sell-off, "sideways nothing burger"). With Friday's sell-off, however, I'm tempted to add a smidge more of QQQ in the November cycle for my weekly 16 delta, 45 days 'til expiry broad market short put (the November 20th 16 delta 237 short put was paying 3.73 at the mid as of Friday close; 1.60% ROC as a function of notional risk). * -- The first metric is where 30-day implied volatility is relative to where it's been over the past 52 weeks; the second, 30-day implied volatility; and the third, the percentage the November at-the-money short straddle is paying as a function of stock price.
NYSE:DAL
by NaughtyPines
EDUCATION: THE OPTIONS HIGHLY LIQUID SINGLE NAME LISTAnd now, for the current single name list: AAL (American Airlines) AAPL (Apple) ABBV (AbbVie) ACB (Aurora Cannabis) AEO (American Eagle Outfitters) AGNC (AGNC Investment) AMC (AMC Entertainment) AMD (Advanced Micro Devices) AXP (American Express) AZN (AstraZeneca) BA (Boeing) BABA (Alibaba Group Holdings) BAC (Bank of America) BB (Blackberry) BBBY (Bed Bath and Beyond) BMY (Bristol-Myers Squibb) BP (British Petroleum) BYND (Beyond Meat) C (Citigroup) CCL (Carnival Group) CGC (Canopy Growth) CHWY (Chewy) CLDR (Cloudera) CMCSA (Comcast) CNX (CNX Resources) COST (Costco) CRM (Salesforce.com) CRON (Cronos Group) CRWD (Crowdstrike Holdings) CSCO (Cisco Systems) CVS (CVS Health) CVX (Chevron) DAL (Delta Airlines) DDOG (Datadog) DELL (Dell Technologies) DIS (Walt Disney) DKNG (DraftKings) DOCU (Docusign) EBAY (EBay ET (Energy Transfer) F (Ford) FB (Facebook) FCX (Freeport-McMoran) FDX (FedEx) FISV (Fiserv) FLIR (Flir Systems) GE (General Electric) GILD (Gilead Sciences) GM (General Motors) GOLD (Barrick Gold) GPS (Gap) GS (Goldman Sachs Group) HAL (Haliburton) HD (Home Depot) IBM (International Business Machines) INTC (Intel) IQ (Iquiyi) JD (JD.com) JNJ (Johnson & Johnson) JPM (JP Morgan Chase) KO (Coca-Cola) KR (Kroger) LUV (Southwest Airlines) LVS (Las Vegas Sands) LYFT (Lyft) MDT (Medtronic) MGM (MGM Resorts) MPC (Marathon Petroleum) MRK (Merck) MRNA (Moderna) MRO (Marathon Oil) MS (Morgan Stanley) MSFT (Microsoft) MU (Micron Technologies) NCLH (Norwegian Cruise Lines) NFLX (Netflix) NIO (Nio) NKE (Nike) NKLA (Nikola) NVDA (Nvidia) ORCL (Oracle) OXY (Occidental Petroleum) PBR (Petrobras) PDD (Pinduoduo) PENN (Penn National Gaming) PFE (Pfizer) PINS (Pinterest) PLAY (Dave & Buster's Entertainment) PLUG (Plug Power) PTON (Peloton) PYPL (Paypal) QCOM (Qualcomm) RAD (Rite Aid) RCL (Royal Caribbean Group) ROKU (Roku) RTX (Raytheon Technologies) SAVE (Spirit Airlines) SBUX (Starbucks) SLB (Schlumberger) SNAP (Snap) SONO (Sonos) SPCE (Virgin Galactic) SPG (Simon Property Group) SQ (Square) T (AT&T) TGT (Target) TMUS (T-Mobile U.S.) TRIP (Tripadvisor) TSLA (Tesla) TWTR (Twitter) UAL (United Airlines) UBER (Uber) UPS (United Parcel Service) V (Visa) VALE (Vale) VIAC (Viacom CBS) VZ (Verizon Communications) WFC (Wells Fargo) WKHS (Workhorse Group) WMT (Walmart) WORK (Slack Technologies) WYNN (Wynn Resorts) XOM (Exxon Mobil)
AMEX:SPYEducation
by NaughtyPines
EDUCATION: THE OPTIONS LIQUID EXCHANGE-TRADED-FUND LISTLiquidity. Liquidity. Liquidity. Whether you're short strangling, iron condoring, laddering out short puts, or doing covered calls, having excellent options liquidity is the cornerstone of any options trade, and the universe of highly liquid options instruments is actually quite small relative to the smorgasbord of underlyings out there. I've posted my list of highly liquid exchange-traded-funds at various times in chat rooms, but thought I'd set it out here for easy reference. Here they are, in alphabetical order, along with a brief description of what they are: BKLN (Leveraged Loan Index) DIA (Dow Jones) EEM (Emerging Market Equities) EFA (MSCI ex. Canada/U.S.) EMB (Emerging Market Bonds) EWA (Australian Equities) EWW (Mexican Equities) EWZ (Brazilian Equities) FEZ (Euro Stoxx 50) FXI (Chinese Equities) GDX (Gold Miners) GDXJ (Junior Gold Miners) GLD (Gold) HYG (High Yield Corporate Bonds) IWM (Russell 2000) IYR (REIT) KRE (Regional Banks) LQD (Investment Grade Corporate Bonds) MUB (Municipal Bonds) QQQ (Nasdaq 100) SLV (Silver) SMH (Semiconductor) SPXL (3 x Leveraged Bullish S&P 500) SPY (S&P 500) TLT (20-Year + Average Maturity Treasuries) TQQQ (3 x Leveraged Bullish QQQ) UNG (Natural Gas) USO (Crude) UVXY (1.5 x Leveraged Volatility) VIX (Volatility) VXX (Volatility) XBI (Biotech) XLE (Energy) XLF (Financials) XLI (Industrials) XLP (Consumer Staples) XLRE (REIT) XLU (Utilities) XME (Metals and Mining) XOP (Oil and Gas Exploration and Production) XRT (Retail) UUP (Dollar Index) And sorted by type: BROAD MARKET EQUITY: DIA (Dow Jones) EEM (Emerging Market) EFA (MSCI ex. U.S./Canada) EWA (Australia) EWZ (Brazil) EWW (Mexico) FEZ (Euro Stoxx 50) FXI (China) IWM (Russell 2000) QQQ (Nasdaq 100) SPXL (3 x Leveraged Bullish S&P 500) SPY (S&P 500) TQQQ (3 x Leveraged Bullish QQQ) BONDS/FINANCIAL INSTRUMENTS: BKLN (Leveraged Loan Index) EMB (Emerging Market Bonds) HYG (High Yield Corporate Bonds) LQD (Investment Grade Corporate Bonds) MUB (Muncipal Bonds) TLT (20-Year + Average Maturity Treasuries) SECTORS: GDX (Gold Miners) GDXJ (Junior Gold Miners) KRE (Regional Banks) SMH (Semiconductors) XBI (Biotech) XLE (Energy) XLF (Financials) XLI (Industrials) XLP (Consumer Staples) XLRE (REIT) XLU (Utilities) XME (Metals and Mining) XOP (Oil and Gas Exploration and Production) XRT (Retail) REITs: IYR XLRE COMMODITIES/CURRENCY: GLD (Gold) SLV (Silver) UNG (Natural Gas) USO (WTI Crude Oil) UUP (Dollar Index) VOLATILITY: VIX VXX UVXY
AMEX:SPYEducation
by NaughtyPines
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).
NASDAQ:MU
by NaughtyPines
THE WEEK AHEAD: M, CLDR, CRWD EARNINGS; GDXJ/GDX, SLV, QQQTHE WEEK AHEAD: EARNINGS ANNOUNCEMENT VOLATILITY CONTRACTION PLAYS: M (41/103/September 18.7%): Announces Wednesday before market open. Potential Plays: September 18th 13 short straddle, paying 1.30 as of Friday close, .33 at 25% max. September 18th 5/7/7/9 iron fly, paying 1.07 as of Friday close, .27 at 25% max. Look to take profit at 25% max. CLDR (68/116/September 20.1%): Announces Wednesday after market close. Potential Plays: September 18th 13 short straddle, paying 2.60 as of Friday close, .65 at 25% max. September 18th 9/13/13/17 iron fly, paying 2.13 as of Friday close, .53 at 25% max. Look to take profit at 25% max. CRWD (32/74/September 15.0%): Announces Wednesday after market close. Potential Plays: September 18th 101/145 short strangle, paying 4.03 as of Friday close, 2.01 at 50% max. September 18th 100/105/140/145. Markets are showing wide in the off hours, but look to put on a setup that pays at least one-third the width of the wings in credit. Comments: Not a ton is shaking next week for options liquid underlyings, but here are what appear to me to be the best candidates for volatility contraction plays. Naturally, I'm just preliminarily pricing these out to see whether they're potentially worthwhile, and actual strikes are likely to change somewhat running into earnings as price moves. EXCHANGE-TRADED FUNDS SCREENED FOR >35% 30-DAY IMPLIED/OCTOBER AT-THE-MONEY SHORT STRADDLE PAYING >10% OF STOCK PRICE: SLV (45/56/15.2%) XLE (24/39/11.2%) GDX (22/47/13.3%) GDXJ (21/58/15.7%) EWZ (17/44/12.3%) XOP (13/50/14.1%) GDXJ is paying the most as a function of stock price (15.7%), followed by SLV (15.2%), XOP (14.1%), and GDX (13.3%). WHAT THE SHORT STRANGLES NEAREST 16 DELTA ARE PAYING: The GDXJ October 16th 15/75 short strangle: 2.15, 3.6% as a function of stock price, The SLV October 16th 22/32 short strangle: .97, 3.6% as a function of stock price. The XOP October 16th 45/63 short strangle: 1.84, 3.5% as a function of stock price. The GDX October 16th 38/47 short strangle: .84, 2.0% as a function of stock price. Comments: I've already got a miners play on, so am likely to avoid getting into another closely correlated underlying here. BROAD MARKET: QQQ (29/32/8.8%) IWM (22/28/7.6%) EFA (17/20/5.6%) SPY (12/22/5.3%) WHAT THE SHORT STRANGLES NEAREST 16 DELTA ARE PAYING: The QQQ October 16th 257/320 short strangle is paying 6.51, 2.2% as a function of stock price. The IWM October 16th 140/170 short strangle, 2.93, 1.9%. The EFA October 16th 60/69 short strangle, .93, 1.4%. The SPY October 16th 317/391 short strangle, 4.95, 1.4%. Comments: In the IRA, I've been mechanically selling 45 days 'til expiry puts at the two times expected move strike (basically, the 16 delta) and will pretty much continue to do so until 30-day drops below 20%. There's always hesitancy to continue to do this at successive all-time-highs, and, yes, it is likely I will be assigned shares at some point in a >2 times expected move sell-off, after which I'll proceed to cover. That being said, I've got an inordinate amount of undeployed buying power after all the acquisitional short put ladders I put on in the sell-off have come off; I'd rather take some risk here to earn "something," all while keeping a reasonable amount of dry powder free to take advantage if we get another one of those bodice rippers we had in mid-March. This week, I'll follow the implied volatility, and as of Friday close, that was in the QQQ's. DIVIDEND EARNERS: XLU (21/23/7.1%) EWA (20/24/7.0%) TLT (18/19/4.8%) EFA (17/20/5.6%) EWZ (17/44/12.3%) IYR (17/24/6.5%) HYG (17/14/2.8%) SPY (16/22/5.3%) EMB (11/11/2.7%) The Brazilian exchange-traded fund leads the pack for the umpteenth week in a row, with XLU and EWA in distant second and third places. I'm fine with continuing to hit EWZ via acquisitional short put over and over again if that's where the implied volatility leads, but, yes, it's kind of getting old. For what it's worth: The 2 times expected move EWZ October 16th 28 short put is paying .36 per contract as of Friday close (1.2% as a function of stock price). Key: The first number in parentheses is the implied volatility rank or percentile (i.e., where implied volatility is relative to where it's been over the past 52 weeks); the second, 30-day implied volatility; and the third, the percentage of stock price that the specified monthly expiry at-the-money short straddle is paying.
C
by NaughtyPines
THE WEEK AHEAD: CSCO, SLV, IWM, VIX/VIX DERIVATIVESEARNINGS: CSCO (46/40) announces earnings on Wednesday after market close. The metrics aren't ideal here with the at-the-money 42.5 short straddle in June paying 4.39, just a smidge north of 10% of the value of the underlying (10.2% to be exact) and the month to month implied differential almost nil (June's at 40.5, July at 40.3%). Nevertheless, a bet that CSCO stays within its expected move -- the June 19th 40/46 short strangle is paying 2.00 at the mid price here with break evens at 37.99/48.01. EXCHANGE-TRADED FUNDS ORDERED BY RANK WITH >35% IMPLIED: SLV (62/44) EWZ (51/63) GDXJ (51/63) GDX (49/51) EWW (45/40) XLE (41/48) USO (34/110) SMH (32/38) XOP (30/61) BROAD MARKET FUNDS ORDERED BY RANK: IWM (52/42) EEM (39/31) EFA (35/24) QQQ (30/29) SPY (26/28) IRA DIVVY-PAYERS ORDERED BY RANK: EWZ (51/63), 5.15% Yield EWA (51/42), 5.31% Yield EWW (45/40), 4.26% Yield IYR (43/34), 3.77% Yield XLU (41/31), 3.48% Yield EWU (37/28), 5.56% Yield EFA (35/24), 3.79% Yield HYG (28/18), 5.49% Yield TLT (27/21), 1.79% Yield SPY (26/28), 1.98% Yield EMB (26/20), 4.92% Yield Notes: Kind of a new section here to track background IV for potential acquisitional plays for the IRA in dividend yielding exchange-traded funds. Currently, running short put ladders in IYR, HYG, XLU, and EWA, but now that I've gotten organized here, may consider similar setups in EWZ (5.15% yield), EWW (5.31%), and EWU (5.56%). VIX/VIX DERIVATIVES: VIX finished the week at 27.98 with the /VX term structure in front months contango. Back months are still "wonky" and present a (for lack of a better word) sinuous path from here to December. TRADE OF THE WEEK: Pictured here is a Plain Jane delta neutral IWM short strangle in the June cycle (40 days) paying 3.37 at the mid price. The highest implied, broad market exchange-traded fund on the board at the moment.
AMEX:IWM
by NaughtyPines
3
THE WEEK AHEAD: SNAP, NFLX, IBM EARNINGS; /ZC, /CLEARNINGS: IBM (63/54) announces Monday after market close. SNAP (92/102) announces Tuesday after market close. NFLX (66/70) announces Tuesday after market close. EXCHANGE-TRADED FUNDS ORDERED BY IMPLIED VOLATILITY RANK/PERCENTILE SCREENED FOR RANK >50/IMPLIED >35%: XLU (77/47) GDXJ (77/84) GDX (67/65) SLV (66/45) TQQQ (63/111) USO (62/112) XLE (59/70) EWW (58/54) EWZ (53/69) XOP (59/91) BROAD MARKET EXCHANGE-TRADED FUNDS ORDERED BY IMPLIED VOLATILITY RANK/PERCENTILE: IWM (72/54) QQQ (47/38) SPY (45/28) EFA (44/31) EEM (41/36) FUTURES ORDERED BY IMPLIED VOLATILITY RANK/PERCENTILE: /ES (44/40) /NQ (47/39) /YM (51/13) /RTY 72/53 /CL (62/130) /NG (94/71) /GC (67/27) /SI (66/43) /ZC (57/28) /ZS (33/17) /ZW (27/31) Notes: Pictured here is a /ZC August 21st 310/330 long call vertical, currently trading at 11.25 with a break even at 321.25 versus 321 spot. Ideally, you'd want to put this on with at least make one/risk one metrics, which would occur if the spread priced out at 10.00 even or below. /ZC is tantalizingly close to those August 2016 lows at 310 '06 ... . Another future worth mentioning here: /CL. As I write this post, the May contract is currently trading at multi-year lows at 15.09, with the June contract trading at 23.66. May drops off this week with the question being how low the June contract will go. I continue to look to sell puts on weakness in the active contract at or below $20. VIX/VIX DERIVATIVES: VIX finished the week at 38.15 with the /VX term structure in backwardation.
CBOT:ZC1!
by NaughtyPines
THE WEEK AHEAD: A PREMIUM RICH MARKETOPTIONS LIQUID EARNINGS ANNOUNCEMENTS: MU (77/112) NKE (74/103) EXCHANGE-TRADED FUNDS ORDERED BY IMPLIED VOLATILITY RANK: EWZ (91/132) USO (89/210) XLU (84/76) GDXJ (82/141) XLE (77/109) EWW (76/105) SMH (73/105) TLT (71/47) XOP (63/154) SLV (73/79) GLD (63/37) FXI (61/63) GDX (57/106) BROAD MARKET ORDERED BY IMPLIED VOLATILITY RANK: IWM (76/71) EEM (74/73) SPY (73/66) QQQ (73/60) EFA (54/53) VIX/VIX DERIVATIVES VIX: 66.04 /VX APRIL: 62.00 /VX MAY: 56.95 /VX JUNE: 49.95 MUSINGS: On Margin: As you can see by the chart showing the top five or so exchange-traded funds having the highest implied volatility ranks, this is largely a closely correlated sell-off. Because of this, I'm somewhat hesitant to pile into a bunch of nondirectional stuff simultaneously, if at all. If we get relief from the selling, these very same instruments could whip back to the call side in closely correlated fashion, leaving me with a bunch of tested call side; whereas now I'm just put side tested (and how). Naturally, this means I have to put up with being far more directional than I would ordinarily be, but these things happen and being patient and mechanical with how you manage current positions will be more productive in the long-term than going bonkers here and bailing out of everything in panic. Unfortunately, this likely means that I will be taking on far more shares of stock than I ordinarily like to hold on margin and then reducing cost basis over time via covered call. I'm always prepared for that, but being in stock on margin isn't buying power efficient, although you always have to plan somewhat for that possibility and go with the flow if taking on shares is really the best way to work yourself out of the trade. In The IRA: As pure luck would have it, leaving my SPY position monied throughout this nonsense (as well as erecting some additional call diagonals at market highs as delta cutters) has served me well. This wasn't particularly prescient or a stroke of genius; I was just doing what I felt I had to do to protect the largest element of my retirement portfolio at a point at which it made the most sense to do that and nothing else. Anyone else who did that and got lucky isn't a guru. No one saw this crap coming, and if they're saying they're a genius, well, I say you're free to call bullshit. Is this an opportunity to pick up things on your shopping list? Maybe. I've taken this opportunity to ladder some out-of-the-money short puts out in a few things that I've had on that list for ages -- XLU, IYR, EFA, and HYG; all dividend generators which have been just far too pricey to deploy the frustratingly large bit of dry powder I've had sitting on the sidelines for ages as the market inexplicably ground up to more and more ridiculous valuations. Will I get in at the best possible prices? The jury's out. I will be getting in far lower than at the market highs we saw just a few weeks ago (assuming price stays below the rungs of my ladders) and won't let anyone talk me out of the proposition that lower is always better in your retirement account even if I don't hit the lows perfectly. The basic strategy here, after all, isn't largely about share price; it's about assembling a portfolio that will pay out dividends regardless of growth and in which you can reduce cost basis over time via short call. It's three-legged: dividends, short call premium, and (if it happens) growth. If the grand arc of time has taught us anything, it's that growth may be an "average given" over the entire life of the market, but may not be over shorter time frames.
AMEX:EWZ
by NaughtyPines
5
CLOSING (IRA): SPY MARCH 20TH 319, 320, 322 SHORT CALLS... for a .31/contract debit. Notes: Hard to believe that these were well in the money a few days ago, but they've largely done their job. Over time, I collected 11.70/contract in credits, and am closing out here for .31, so made 11.39 ($1139)/contract, all while protecting my SPY position from most of the bruising it got over the last week. (See Overwriting Post, Below). The downside (if it really is one) is that the entire position has returned to net delta long, although I've still got a QQQ long put diagonal hanging out there (See Post, Below) providing me with some short delta that was erected as a secondary hedge against. The 370's have gone no bid, so will just leave those on to expire ... . Generally, I like to erect these on strength, but may re-up if I can sell calls clear of those all-time-highs and get paid to do so.
AMEX:SPYLong
by NaughtyPines