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Shortstraddle

Rolling: JETS December 17th 23 Short Straddle to January 21st... and selling the 19/27 long straddle aspect for an .86 credit total. Comments: This originally started as a 19/23/23/27 iron fly, for which I received a 1.86 credit. (See Post Below). I closed out the longs for a .42 credit and then rolled to naked "as is" to the January 21st monthly for a .44 credit with the net delta of the position now being bullish (since my assumption is that this recovers at some point). Total credits collected of 2.72.
AMEX:JETS
by NaughtyPines
OPENING: EWW SEPTEMBER 18TH 32/33 SKINNY SHORT STRANGLE... for a 2.44/contract credit. Notes: With price trading in between the 32 and 33 strikes, went skinny short strangle in lieu of short straddle. Since it's almost a straddle, I'll look to take profit at 25% max. I've gone ahead and shown defined risk wings for an iron fly/skinny iron condor setup on the chart -- the September 18th 28/32/33/37, which was paying 1.97 as of the writing of this post, just short of the one-half the width of the wings I look for out of an iron fly (i.e., this would be a four-wide iron fly, so would ideally look for around 2.00 in credit out of it).
AMEX:EWW
by NaughtyPines
SPY JAN 17TH 282 SHORT STRADDLE -- CONT'DThis is a continuation of a short straddle I've been diddling around with since July ... . As of the last roll (See Post Below), my scratch point was 24.71 versus the straddle value of 27.79. As of today's close, its value was 27.32 with 19.49 of extrinsic and delta/theta metrics of -23.07/8.55. I also erected a November 270 short put (currently 22.82 delta) as a hedge which I will work independently ... . From a trade management standpoint, I've been looking to periodically roll out for a realized gain and/or to keep the short straddle within +/- 30 delta of neutral.
AMEX:SPY
by NaughtyPines
Aug 9 45 Short Straddle Weibo FOR WHOPPING 5.50 CREDITWith a moderate IVR of 32.3, it makes sense to enter into a short strangle, where we are writing both the 45 calls and puts with the August 9th expiry. This trade does have unlimited risk, but does earn a profit of 550 per contract when the underlying security, Weibo, a Chinese Internet Technology firm, stays exactly at the k of 45. Because of the priced-in volatility, it is possible to execute this trade for a whopping credit of 5.50 per contract, which allows there to be a large range of values the security can take for which the trade can be profitable. This trade is driven by the ability to get such a wide profit margin, and is supported by the channel in which the security has traded since May 22nd. Indicators further the neutral but slightly bullish notion, and the short strangle is likely to be profitable. Seeing that the RSI and CCI both indicate it is slightly overbought and the ADX indicates growing slight bullish momentum, we choose to execute this at the 45 instead of the 40 (there are no strikes for the aug 9th expiry actively traded in between, and closer-to-the-money). Also, by using the August 9th expiry, we are able to get out of the position before the earnings announcement, which could move the stock dramatically. Going out another week would've only given us .18 more credit, which is not needed. With Weibo being Chinese, there is obviously exposure to trade war tensions, but following the G20 summit, things seem to have stabilized. With an $11-wide area in which profit can be attained, this trade makes a lot of sense, even considering the possible changes to and budding instability in the macro environment.
NASDAQ:WB
by LaurenTrading
OPENING: XOP JUNE 21ST 32 SHORT STRADDLEThis is a continuation of a directionally neutral premium selling play (See Post Below) which I've rolled out to June and transformed into a bullish assumption premium selling play. Here, I'm looking to work it as a quasi-synthetic covered call, with the in the money short put standing in for my stock, and the short call acting as cover. Naturally, it isn't completely accurate to describe it as a "synthetic covered call" because covered calls have no upside risk, and this setup does. A more accurate description would probably be "bullish assumption short straddle." A true synthetic covered call would be something like a 70 delta short put with no upside risk since many covered calls are in the area of 70-80 net delta long (100 long delta for the stock, 20-30 delta short for the call). There are a couple of reasons for why I prefer bullish assumption short straddles to in-the-money short puts with covered call metrics: (a) the delta is a little flatter; and (b) you get a little extra sumthin' sumthin' in cost basis reduction by having the short call on. Here, the net delta of the position is around 50,* versus the 70 delta short put/synthetic covered call. As usual, the trade off is the upside risk aspect of the setup, which will have to be managed as any other oppositional setup would in the event that the underlying rips through the short call strike. In any event, I've collected 2.86 in credits so far, which would mean my cost basis in any shares assigned via the 32 short put would have a cost basis of 29.14 versus 28.98 spot, so it's slightly underwater at the moment. Like a covered call, I'll look to roll the setup out as a unit when the short call approaches 50% max. * -- The net delta on the position can be made "shorter" by setting it up closer to at-the-money; "longer" by setting it up farther away. Generally speaking, I like to sell the 25 delta short call and sell the same strike short put, which generally yields delta metrics in the 40-50 net long area, depending on skew.
AMEX:XOP
by NaughtyPines
THE WEEK AHEAD: NIO EARNINGS; XOP, EWZ PREMIUM SELLINGMy screeners aren't showing me a ton of things for either earnings-related volatility contraction plays and/or just Plain Jane premium selling, so I'm largely looking just to work what I have on, do any adjustments that are necessary, and wait for a higher volatility environment (VIX is at sub-15 here) to deploy capital back into premium selling. The Chinese "Tesla killer" NIO (82/136) announces in two days and with a background implied clocking in at 136, who can resist putting something on. Pictured here is a fairly delta neutral 11 Short Straddle in the April expiry that is paying a whopping 4.18 at the mid (1.04 at 25% max) with break evens that encompass most of the underlying's whole data set -- 6.82 to 15.18. Even skewed to the call side, the net delta is -2.59 with a theta metric of 4.08. Obvious alternative plays: April 18th 7/11/11/15 iron fly: 3.10 at the mid, max loss of .90 versus max profit of 3.10 (.78 at 25% max), delta -.97, theta 1.43. I would note the rarity of the substantially better than risk one to make one metrics of this setup. April 18th 7 short put, .72 at the mid with a downside break even of 6.28. On the exchange-traded fund front, the vast majority of underlyings are at the very low end of their 52-week ranges, with the highest implied underlyings in XOP (16/30) and EWZ (10/30), which again militates in favor of not putting on a ton of nondirectional premium selling stuff here. I did look at ASHR, which did stick out at 75/34, but the options chains in April, May, and July have wanky strikes (i.e., the April 28th 27.71 (WTF?) short straddle), and I don't like having to roll from "wanky" to an even Steven strike if I have to. If I'm going to play China, it's going to be in the more liquid FXI (16/21), which doesn't suffer from similar oddities that make trading it potentially harder than it has to be.
NYSE:NIO
by NaughtyPines
OPENING: NIO JUNE 21ST 9 SHORT STRADDLE... for a 3.08/contact credit. Metrics: Max Profit: $308/contract Max Loss/Buying Power Effect: Undefined; ~$180/contract (on margin) Break Evens: 5.92/12.08 Delta: 19.79 Theta: .99 Notes: A small bullish assumption play in a small underlying with high 30-day implied at 77.4%. Going out farther than usual in time because it won't tie up much buying power in the process. Plus, who can resist a credit that exceeds buying power effect, particularly in a now sub-15 VIX environment. Will look to take profit at 25% max.
NYSE:NIOLong
by NaughtyPines
XOP MAY 17TH 30 SHORT STRADDLE (CONT'D)This is a short straddle that started as a double diagonal. (See Post Below). I've been rolling the short straddle body out to generally at-the-money to take profit and to bring in additional credits. Although implied volatility (31%) is at the low end of its 52-week range, it is more than twice that of the broad market; SPY is at 14%. So far, I've collected 4.31/contract and will just continue to roll out as profitable opportunities present themselves or -- in the alternative, a side is approaching worthless and/or time is running out on the setup ... .
AMEX:XOP
by NaughtyPines
TRADE IDEA: BMY APRIL 18TH 55 SHORT STRADDLEMETRICS: Max Profit: $733/contract ($183 at 25% max; 16.7% Return on Cap On Margin) Max Loss/Buying Power Effect: Undefined/~$1100 on margin Break Evens: 47.67/62.33 Delta: 24.37 Theta: 5.11 Notes: I'm still feeling bullish, just not as bullish as I was at the beginning of the year -- hence the 24 long delta metric. From a price action perspective, low side break even and short straddle strikes line up nicely with "local low/highs" between 47 and 54. As with the other setups I worked (MAT, EA, See Posts Below), markets are showing wide in the off hours, so this might not be as attractive when markets open tomorrow, but it's nice to know that there are other possibilities on tap than playing CZR, RIG earnings for volatility contraction. Other Obvious Setups: April 18th 47 short put, 1.24 credit at the mid (.62 at 50% max), 45.76 break even, delta 24.37, theta 2.02. April/June 45/55 upward call diagonal, 6.45 at the mid, break even of 51.45 versus 51.67 spot, debit paid to spread width ratio of 64.5%, max profit on setup of 3.55/1.78 at 50% max/27.5% return on capital. Markets are ghastly in the off hours for this: bid 5.06/mid 6.45/ask 7.85, so it'll have to be priced out during NY.
NYSE:BMYLong
by NaughtyPines
OPENING: FCX APRIL 18TH 13 SHORT STRADDLE... for a 1.90/contract credit. Metrics: Max Profit: $190/contract Max Loss/Buying Power Effect: Undefined/~$260 (on margin); full notional (cash secured) Break Evens: 11.10/14.90 Delta: 31.37 Theta: 1.05 Notes: Implied volatility's still pretty high post-earnings at 42%, so taking a modestly bullish assumption shot with a position that emulates the delta metrics of a 30 delta short put while bringing in more credit, albeit with some upside risk above 14.90. In comparison, the 30 delta shortie in April (the 11 strike) is bringing in .47 with a down side break even of 10.53. I'll look to take profit at 25% max (.48) which would be about an 18.3% return.
NYSE:FCXLong
by NaughtyPines
MODEL/DEMO TRADE: SPY MARCH 15TH 263 SHORT STRADDLEPictured here is a model and/or demo trade set up for purposes of showing a "continuously rolled" short straddle trade in SPY where the straddle is rolled out as a unit for duration/credit at 5-10% max to strikes that will result in a <+/- 30 delta setup, with the ideal being to roll from at-the-money to at-the-money. This type of trade can be used in any liquid options underlying and modified to defined risk via the use of long option wings. (See, e.g., XOP Double Diagonal Post Below). For purposes of the demo, mid price fill will be assumed with end-of-day share prices being used. On setup: Max Profit: 12.91 ($1291) (.64/$64 at 5% max; $129 at 10% max) Max Loss/Buying Power Effect: Undefined/~$5200/contract (on margin); full notional (cash secured) Break Evens: 250.09/275.91 Delta: -10.04 Theta: 14.53
AMEX:SPY
by NaughtyPines
OPENING: EEM FEB/APRIL 36/41/41/46 DOUBLE DIAGONAL... for a 1.22/contract credit. Doing a smidge of defined risk, all-weather, broad market instrumentation here ... . The metrics aren't much to look at, because they aren't static,* but here they are: Max Loss/Buying Power Effect on Setup: $378/contract Max Profit on Setup: $122 Delta: 3.48 Theta: 1.9 As far as intratrade management is concerned: Look to roll out the short straddle aspect on decrease in value/realized gain for a credit to at-the-money. Since the short straddle aspect is worth only 1.80 here, you're probably going to want to wait until something approaching 25% max (i.e., .45) before burning a roll. As far as the long strangle aspect is concerned, my tendency is to largely leave it alone unless the short straddle has moved significantly to one side or the other, at which time I generally look at recentering the long strangle via rolling. Look to take profit at 25% of what you'd get were this a static iron fly with risk one to make one metrics (in this case, it's a 5-wide with a risk one to make one setup paying 2.50 with a 25% max of .63 or so) and then reset the setup anew. * -- The overall risk of the trade can potentially diminish over time on roll of the short straddle body for additional credits and/or adjustments of the long strangle aspect to maintain max loss potential (the difference between the width of the spread and total credits received).
AMEX:EEM
by NaughtyPines
7
OPENING: SNAP NOV 16TH SHORT STRADDLE... for a 2.21/contract credit. Metrics: Probability of Profit: 54% Max Profit: $221/contract Max Loss/Buying Power Effect: Undefined/~1.72 on margin Break Even/Cost Basis of Shares If Assigned: 7.79 Theta: 1.46 Delta: 41.92 Notes: Another potential "wheel" trade. Will initially shoot for 25% max for the short straddle, but will also be fine if assigned with a cost basis of 7.79/share (a 7.8% discount over current spot), after which I'll proceed to cover.
NYSE:SNAPLong
by NaughtyPines
OPENING: XOP SEPT 21ST 42 SHORT STRADDLE... for a 3.05/contract credit. Metrics: Max Profit: $305/contract Max Loss: Undefined: $848/contract on margin Break Evens: 38.95/45.05 Delta: -6.55 Theta: 3.31 Notes: Admittedly, the implied volatility rank and implied volatility metrics here aren't great (11 and 25, respectively) but the credit collected as a function of the buying power effect is decent (36%). As with the previous XOP short straddle cycle (see Post Below), I'll look to take profit quickly ... .
AMEX:XOP
by NaughtyPines
2
THE WEEK AHEAD: HTZ, YELP EARNINGS; SLV/GLD/GDX LONGSHTZ puts the pedal to the metal on Monday after market close and is at the 52% mark of its 52-week range and has a 30-day implied of 75%. Due to its size, I'd probably only go short straddle: the Aug 17th 16 short straddle is paying 2.28 with a 25% take profit of .57. YELP shout outs its earnings on Wednesday (8/8) after market close (rank 66/30-day implied 61). Pictured here are two setups: an Aug 17th 38 short straddle and an Aug 17th 34/43 short strangle. The short straddle is paying 4.56 with a 25% take profit of 1.14; the short strangle, 1.49, with a 50% take profit of .75. On the exchange-traded fund side of things, not much is hopping with the only underlying ranked above 50% for the past 52 weeks being USO (rank 59; implied 26), with everything coming in at sub-35% for 30-day implied, which makes things temporarily unattractive in this area. (EWZ's at 32, XOP at 25, OIH at 25, and it kind of goes downhill from there). In the single name underlyings with earnings announcements in the rear view mirror, TSLA tops out the list with 51% 30-day, followed by TWTR (43), X (40), and RIG (40). In the major food group area: GLD, SLV, and GDX are all are fairly long-term horizontal support, so it may be worth taking a small bullish directional shot in one of those, although it's possible that's there more pain ahead for gold/silver/miners with another rate hike on tap in September. TLT: I'm looking for another short opportunity (probably on risk off) at horizontal resistance in the 122 to 122.50 area (we were at 119.22 on Friday, up .49 from Thursday's close). /CL's come quite a bit off of its nearly 73 high, but it's also somewhat off horizontal support at 64; I don't see much to do there directionally until it inflects with one of those prices (for that very reason, I could see something nondirectional here, if only XOP would throw all little more volatility my way, which is what I usually use to play oil nondirectionally). With the broad index funds (SPY, IWM, QQQ), all-time highs are again in view (287 in SPY, 170 IWM, 183 in QQQ); I could see a small directional short setup in one of those instruments, if only to add some short delta into your mix if you're getting too long (assuming you didn't add some on the last flirtation with all-time-highs ... ).
NYSE:YELP
by NaughtyPines
OPENING: EWZ AUG 17TH 34 SHORT STRADDLE... for a 2.44/contract credit. Metrics: Max Loss/Buying Power Effect: Undefined/6.94 Max Profit: 2.44 Break Evens: 31.56/36.44 Theta: 3.89 Delta: -14.41 Notes: Going where the volatility is at (again) in exchange-traded funds to sell a little August cycle premium while I wait for the September monthly to be more in that 45 days until expiration sweet spot. Recently, I've been taking profit in these short straddles fairly quickly (10% max) and then reselling at-the-money, but doing that here (and probably after this point) admittedly presents a marginal trade (10% max of 2.44 is .24).
AMEX:EWZ
by NaughtyPines
2
OPENING: EWZ AUG 17TH 35 SHORT STRADDLE... for a 2.97/contract credit. Metrics: Max Loss/Buying Power Effect: Undefined/~$670/contract Max Profit: $297/contract Break Evens: 32.03/37.97 Theta: 3.15 Delta: 30.73 (Neutral to Bullish) Notes: Here, I'm looking to emulate the delta of a naked 30 delta short put (paying ~.70/contract currently), but bringing in the beefier credit and extrinsic value of a short straddle. Looking to take this off for the lesser of 10% of buying power effect (~.67) or 25% of max (~.74).
AMEX:EWZLong
by NaughtyPines