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Strangle

M&M good for Short Strangle (700-800 type)?Although M&M slipped sharply after its monthly numbers, it is probably tracing a triangle. The upside should be capped for few weeks to recent highs around 814. Downside may extend to 720 (not beyond for few days). Seems good candidate for short strangle. Can also do a broken iron condor by adding a put protection to the downside, should ensure minimal loss if breaks heavily to the downside. All ideas shared for educational purposes only.
NSE:M_M
by yash_utmani
Break out or Break down - $C - CitigroupShort-term call? After a quick drop and sharp earnings reversal, Citigroup seems to be ready to break out of the "Head and Shoulders" pattern it has been setting for a year. In the past two years especially, the second half of the year has typically been a boon to the Financial Sector. Due to the lack of resistance, if Citigroup does resume it's trend, it's clear skies until $73 or 8 strikes from it's Monday (7/16/18) close of $69.47. MACD & RSI divergence, higher lows & highs, hint it's break out time; although $C tends to test support when closing below a mid-dollar strike (e.g. $68.5, $69.5 ... ) many signs seem bullish. Short-term Put? Since the 100-day MA hasn't been traversed quite yet and dimming global outlook for a very globally diverse financial institution are pertinent concerns: a resumption of $C's breakdown toward $67.50 is still plausible; Less likely after $66.50 was touched and multiple lines of support drawn there after during the post-earnings fire-sell, but still plausible all the same. Having a complete collapse like the "Head & Shoulders" suggests, and a fall straight through $66 is more of a longer term trend that is unlikely, but still possible. Caution would be to start with a strangle or straddle around the $69.50 strike, with the call focusing on the resistance-turn-support of $69 (firmly in the money) and roll the dice with the put's placement, with one's choice on potential gains. At the end of the day: Financial deregulation, tactical global divestment, Citigroup's 10% share buyback, increase in dividend payouts and a solid beat on it's Q2 earnings (despite the sell-off) all point toward a brighter future. Old allies and Old foes becoming the opposite, nationalistic rhetoric and new Middle-Eastern oil deals all are obstacles, but whether they are insurmountable is up to your short-term hypothesis because only time tells; and time is always money.
NYSE:C
by Arizard
HPQ covered strangle Rather than just holding HPQ stock with hope that it may go higher this year, collecting a 2.5% yield while waiting, I instead plan to sell options premium this week against my $22 cost basis for a higher return on capital. Implied volatility on HPQ is over 30% and rising as we near the earnings report date of May 29 after the close. Of the past 8 quarterly earnings reports, the stock has ended a few percent lower on only 3 occasions. I could sell the stock for a tidy gain around 24 where it reached a couple times already this year. The 24 strike at 21 delta means almost an 80% chance the call will expire worthless and I keep the credit of 25, or about 1.1% of the cost. Because after transaction fees, this credit is small, I'd want to instead A) sell the lower 23 strike at 36 delta for $50 credit, or B) also sell an 'out of the money' put for additional credit (forming a covered strangle) if I'm willing to add to the stock position at a lower price on pullback, or C) both. The trade order for a covered strangle would be something like : SELL -1 STRANGLE HPQ 100 20 JUL 18 23/21 CALL/PUT @1.00 Selling a covered strangle on HPQ is attractive for several reasons: although it means a higher chance of assignment fees at the 30 delta strikes, it brings in nearly 100 credit, which is 4.5% of the current spot price of HPQ (27% annualized). The HPQ daily options volume is only about 8,000 so the 'at the money strikes' closer to the current stock price are the most liquid and easiest orders to fill. At 21 a share adding another lot is a small commitment. Fundamentally, I believe the stock fair value is higher so I'm willing to risk adding another 1 lot of stock if the stock drops or holding if HPQ trades sideways. The price support around 21 looks solid on the stock going back almost a year. The current Trefis fair price estimate for HPQ is around $25. Based on the 2018 EPS estimate of 1.96, and a long term 5% EPS growth over next 3-5 years, my DCF model suggests a current fair value of $25.50- $27 range.
NYSE:HPQLong
by dime
Neutral trade on IYR,58% probability (Strangle)The Implied Volatility Rank of IYR is at 65 and with a down move of around 6% in the last 20 days, I expect we are going to start a correction soon around the value area. So I decided to sell a Strangle to collect some premium. With 37 days to expiration I Sold the 80/76 Strangle for 0.95 credit. That will give me a 58% probability to make money, but if I close it when the price of the strangle reach 0.48 my probabilities jump to 80%, so that's the plan. The Trade: Expiration = Feb 16 Sell 80 Call Sell 76 Put Credit Received = $0.95 ea Probability of profit 58%
AMEX:IYR
by AlexanderGotay
2
Skewed Strangle on UVXYAfter a brief moment of Backwardation this week in the term structure of the Vix futures, we came back into Contango. To me it looks like there is still some fear and buying protection is not getting cheaper, especially with earnings coming up on some of the big dogs. I believe volatility will start to come off during the next couple of days, so I want to add to my core short volatility trades. UVXY Implied volatility is still very high so I decided to sell some premium. I sold the 12/8 Strangle for $2.60. What can go wrong? If UVXY rises over 35% in the next 42 days I will get assigned 100 Shorts per contract. I don't mind being short volatility since that would just be an addition to my already core shorts (Part of the plan). Getting long is another ballgame, and one I don't like that much (So I skewed the Strangle to the downside). But for this to happen First UVXY would have to drop over 48% in the next 42 days. If that happens I will be pretty happy making a killing in the rest of my Shorts. On this one, I would take the assignment at the $8 price with a cost basis of effectively $5.40. That is a pretty low price (Most likely would have reverse split by then) and I am sure I can Sell some Calls after to get out of the trade on top. The trade: Short 12 CAll Short 8 PUT Credit received $2.60 Probability of profit is 63%
CBOE:UVXY
by AlexanderGotay
Long Strangle - NIFTYHello, in the current market it is impossible to catch the trend, so plz do not do it. What's guaranteed over next few days and mainly this week due to budget is the volatility. So one need to be long volatility. I know this can be done by buying VIX future but obviously that has a big ticket size so not advisable for most investors. So what we do is buy long options. Remember volatility is directly related to option price. Higher the vol, higher the option price (both call and put). But again we are not sure of the direction, so we should buy both a call and put. Now which strike to choose? It has to be out of money for feb expiry. This is a classic long strangle. Buy any strike with equal distance from NIFTY at your point of trading. So e.g., if NIFTY is at 11000 then do +/-200 points strike on both direction (delta neutral to an extent). So 11200 call and 10800 put. You can choose your own range based on time of trading but important to remember that you choose out of money strike. Since this is a pure vol trade (vega capture) you should not hold it for more than 7-8days (max 12th Feb). This is because as the expiry is near volatility (vega) losses its significance. Close the trade when vol spikes and you see one of the side of trade is significantly higher than other giving an decent overall profit. All the best and hope the trade proves to be rewarding for you. Mr. Shah
NSE:NIFTY
by a_shah2
61% Probability on EWW (Strangle)Yesterday We got a close above the 200 Moving average and EWW is right inside the Volume area, and right at the Point of control. So I expect two-way action between buyers and sellers, giving me a chance to make a neutral trade. With EWW IV Rank at 57, I sold the 54/50 Strangle (30 Delta) that expires in February, to take advantage of the high volatility. The trade: 30 Days to Expiration (2/16/2018) Sold the 54 CAll Sold the 50 PUTS Credit receives $1.10 each Max profit $110.00 for each contract Probability of profit 61%
AMEX:EWW
by AlexanderGotay
Neutral trade on the Euro (Skewed Strangle)The Euro have been on a tear and is due a correction. However I think it will be slowly and gradually start a new range, giving us time to take profit of a volatility contraction. With 50 days to go I am selling a strangle of the DEC17 Euro Future Symbol /6EZ7. I am giving me some more space to the downside skewing the Strangle a little bit down to around the 20 delta and around the 35 delta to the upside. The trade: Sell 1.155 Put Sell 1.195 Call Max win $1,625 Expiration date 10/7/2017
E
by AlexanderGotay
PFE Covered StrangleIn May I'd sold a covered call on PFE for debt of 32.50 (expired). I'd also had 1 lot from a year ago at 34.76. (Adjusted cost basis for 2 lots @ 33.63 ) I sold 32/34 Sep strangle for 50c before earnings for break-evens at 31.50 & 34.50. Today's current 1SD range by Sep expiry is 32-35, highlighted orange above. Possible outcomes: 1) Ideally the stock will rally above 34, with 1 lot called away at 34 for a small 1% gain on the position and theoretical unlimited profit on the second lot. 2) It stays between the 32 & 34 strikes until expiry and collect the full $50 credit. Might not seem like much but by selling these against the stock each quarter could bring in an extra 6% annually. If you're good it can be done twice as often as that! 3) Stock drops > 3% below the put strike and I'm assigned another lot of shares at 32 which averages down my overall cost basis on the stock. 4) The entire market crashes and the stock falls to 0... I do like the fundamentals of PFE and am willing to make a longer term investment. CFRA gives the stock a current fair value of $33 and Trefis price estimate is $34.60. The stock currently yields a 3.9% dividend and currently has a free cash flow yield over 6%.
NYSE:PFE
by dime