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Rolled: ARKK February 18th 82.22C/104.22P to March 18th... 81.22C/103.22P for a 1.25 credit. Comments: Rolling this out a touch early due to lack of extrinsic in the short put, which ostensibly increases assignment risk. I improved the short put by a strike, but kept the inversion the same -- a 22 wide for which I've collected 19.50 (See Post Below) plus 1.25 or 20.75, with my resulting cost basis in any stock I might be assigned via the short put 103.22 - 20.75 or 82.47 relative to where it closed today at 75.87. I prefer working these inversions to a point where either I can scratch them out or where taking assignment would be at "something close" (a relative term) to where the stock is currently trading. That way I'm not starting out working a covered call way under water such that selling calls against at or above my cost basis wouldn't be productive. Naturally, there's a point where you ask yourself whether you've mitigated enough loss such that you can comfortably take the hit, free up the buying power for something more productive and then move on.
AMEX:ARKK
by NaughtyPines
5
Opened (IRA): IWM March 4th 185 Short Put... for a 2.50 credit. Comments: Sold premium right at the close in the expiry nearest 45 days to emulate dollar cost averaging into small caps. Holistically, I've been using IWM for shorter duration trades (~45 days until expiry) and SPY for longer duration ones (since it doesn't pay as well as a function of buying power effect), and then coupling that with a longer-dated short delta hedge or hedges. (See, e.g., Post Below). I'm still net delta long, just not as long as I would be were I to be all short put without some kind of short delta aspect.
AMEX:IWMLong
by NaughtyPines
2
The Week Ahead: NFLX, ARKF/ARKG/ARKK, XBI, KWEB, URA, IWM, QQQI haven't done one of these in quite some time, but thought I'd do one over this long holiday weekend. Earnings: I looked at a number of these for next week (there are quite a few) and have culled things down to the most liquid options underlyings, ideally with implied volatility rank >70% and 30-day greater than 50%. Only NFLX really fits that bill, even though it's a smidge shy of a 50% 30-day. For instance, I did look at CTXS (87/46), but when I dug into the options table, I wasn't fantastically excited about setting up a short strangle with only 2.5 to 5-wides where I'd want to set up my tent on both the put and call sides. NFLX (76.9% rank/44.8% 30-day) announces earnings on Thursday after market close, so look to put on a play before the end of that session if you're looking to play the announcement for a volatility contraction. Pictured here is a February 18th 450/610 short strangle with the legs camped out at the 13 delta. Paying 9.20 at the mid as of Friday's close on buying power of 52.59 (on margin), it has a 17.5% ROC at max, 8.7% ROC at 50% max. I like to go wider with earnings announcement volatility contraction plays since these do one of two things: (1) come in immediately; or (2) give you headaches for several cycles if the move has been overly large and you have to defend the setup to scratch in a contracted volatility environment. If you're more of a defined risk bent, throw on some wings: the February 18th 440/450/610/620 iron condor is paying 1.90 on buying power effect of 8.10, 23.5% ROC at max, 11.7% ROC at 50% max. Naturally, these are just preliminary pricing and strikes. You'll want to adjust strikes as necessary, since the underlying is likely to move somewhat running into earnings. Exchange-Traded Funds Screened for Implied Volatility Rank >50% and 30-Day >35% and Ordered by Implied Volatility Rank: ARKF (84/52) (Cathie Woods' Fintech Innovation) XBI (83/43) (Biotech) ARKG (79/59) (Cathie Woods' Genomic Revolution) KWEB (60/51) (China Internet) ARKK (59/44) (Cathie Woods' Innovation) URA (41/59) (Uranium) A lot of Cathie Woods' stuff in there ... . I like to reserve these for the monthlies, since the weeklies aren't all that liquid in some of these. Unfortunately, the February 18th monthly is a little short in duration for my tastes (33 days until expiry) and March a bit long, so will probably hand sit on deploying buying power in this area until the March monthly's duration shortens -- it's currently 61 days, and I like to keep things +/- a week or so of 45 days. One underlying that doesn't really have a 52-week valid implied volatility rank is BITO (1/68), since it hasn't been around for 52 weeks yet. However, that "1" indicates that its implied is low within the range its established since inception, and I'd naturally prefer it to be higher even though its 30-day outranks all of 30-days I've got in my little list, so I'm keeping an eye on it, having just exited a BITO short strangle on Friday. Broad Market Exchange-Traded Funds Ordered by Implied Volatility Rank: XLK (46/27) QQQ (43/25) EFA (35/17) IWM (36/26) DIA (24/18) SPY (23/19) I've moved XLK from my exchange-traded fund grid to my broad market grid, since it enjoys a close correlation with SPY (.87 90-day) and an even closer correlation with QQQ. XLK is about half the size of QQQ, so if you like to layer on, it's a little more nimble for that purpose. I've been selling premium in small caps (IWM) in the weeklies to bide my time while monthly setups come in or have to be managed, but may consider sticking some of my pickle into QQQ next week given the fact that its rank implies that it's more "expanded" (if that makes any sense). I'd probably use the March 4th expiry, where the QQQ 16-delta 342/408 is paying 5.69 on buying power of 48.03, 11.8% ROC at max, 5.9% at 50% max. Naturally, the market may look entirely different from an implied volatility standpoint coming off a long holiday weekend, so I always have a second look at whether doing that is worthwhile once the market opens.
NASDAQ:NFLX
by NaughtyPines
5
Rolling (IRA): SPY February 18th 416 to May 20th 365... for a 2.02 credit. Comments: Straightening up my longer-dated SPY setup, where I'm basically emulating dollar cost averaging into the broad market without actually taking a position in stock. With the February 18th 416 at greater than 50% max, rolling it out to May to the strike paying at least 1% of the strike price in credit, after which I'll roll it up intraexpiry or out for duration at 50% max to the strike paying at least 1% in credit, assuming that strike is <16 delta. I now have March, April, and May rungs on at will continue to either roll or add at intervals with the preference being to add on weakness and higher volatility (>20 VIX/>20 30-day implied). I've rolled this a bunch of times, collecting a total of 21.89 (See Post Below) plus the credit received here of 2.02 for a total of 23.91 relative to the 3.80 or so the May 365 is currently paying, so have realized gains of 23.91 - 3.80 = 20.11 ($2011) so far.
AMEX:SPYLong
by NaughtyPines
2
Rolled: ARKK February 18th 94.22 Short Call to 89.22... for a 1.74 credit. Comments: Yowsa. This continues to implode, so continuing to manage it defensively ... . As of my last roll, I'd collected 15.25 in credits. (See Post Below). With this roll, I've collected a total of 16.99 for what is now an inverted 15-wide: the 89.22C/104.22P with a downside break even of 104.22 - 16.99 or 87.23 relative to today's closing price of 85.58, so I've still got some work to do to get my cost basis at or below where the underlying is currently trading. Alternatively, I need the markets to do some of the work for me by giving me a bounce.
AMEX:ARKK
by NaughtyPines