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XOP

Everything Energy Is Down, XOPThe SPDR S&P Oil & Gas Exploration & Production Fund has been in a defined bearish trend for all of 2017. Due to this bearish movement, the 100 day moving average (DMA) is about to cross below the 150 DMA. This actual event has occurred 6 times in the history of the fund and has resulted in a minimal drop of 1.541%. It has a median drop of 6.918% and maximum drop of 25.563% over the following 22 trading days. Although I typically write on events that have occurred, this event is likely and greater benefit could be gained by making moves earlier. When we take a look at other technical indicators, the relative strength index (RSI) is at 43.0611. RSI tends to determine trends, overbought and oversold levels as well as likelihood of price swings. I personally use anything above 75 as overbought and anything under 25 as oversold. The current reading declares the fund has been moving lower. The RSI has been trending lower since May 2016. Even though the RSI typically cycles between overbought and oversold levels, that has not necessarily been the case with this fund. Overall the RSI is failing to make newer highs which is another significant signal of downward movement. This overall downtrend should continue as long as the RSI stays below this trendline. The true strength index (TSI) is currently -16.2542. The TSI determines overbought/oversold levels and/or current trend. I solely use this as an indicator of trend as overbought and oversold levels vary. The TSI is double smoothed in its calculation and is a great indicator of upward and downward movement. The current reading declares the fund is trending down. Similar to the RSI, it is been trending down and failing to make new highs since May 2016. However, one new high was achieved near the end of 2017, before falling back into the downtrend. This overall downtrend should continue as long as the TSI stays below this trendline. The positive vortex indicator (VI) is at 0.8265 and the negative is at 1.0848. When the positive level is higher than 1 and higher than the negative indicator, the overall price action is moving upward. When the negative level is higher than 1 and higher than the positive indicator, the overall price action is moving downward. The current reading declares the fund slightly moving up recently, but should begin its downtrend again. The stochastic oscillator K value is 22.6852 and D value is 16.1343. This is a cyclical oscillator that is highly accurate and can be used to identify overbought/oversold levels as well as pending reversals and short-term activity. I personally use anything above 80 as overbought and below 20 as oversold. When the K value is higher than the D value, the stock is trending up. When the D value is higher that the K value the stock is trending down. The current reading declares the fund has been flirting with oversold territory for at least two weeks. Most likely one of two things will occur. The fund will continue to slowly move down with up days causing the stochastic to stabilize and rise even though the fund continues its downward bias. The second possibility would have the fund rise up and out of the downtrend either temporarily or permanently. Considering the moving average crossover, RSI, TSI, VI and stochastic levels, the overall direction appears to be pointing down. Based on historical movement compared to current levels and the current position, the stock could drop at least 4.7% over the next 32 trading days.
AMEX:XOPShort
by StockSignaler
THE WEEK AHEAD: EWY, FEZ, FXE, AND OIH/XOP/XLEWith VIX in another ebb and a paucity of high quality premium selling earnings plays in the making for next week with both high implied volatility rank and high implied volatility, I'm looking at exchange traded funds instead for potential plays. For instance, EWY, the South Korea exchange traded fund, makes sense in the current geopolitical environment, and its implied volatility rank and implied volatility reflect this, coming in at 55/22. It doesn't meet my usually standards of >70 and >35, but sometimes the market doesn't allow you to be picky. The June 16th 56/59/65/68 iron condor brings in .81 at the mid (not quite up to my usual 1/3rd the width of the wings snuff); alternatively, the June 16th 57/62/62/67 iron fly brings in 2.76. A drawback is that this instrument only has monthlies, a situation I'm not fond of ... . With French election finals on the horizon on May 7th, another play that makes sense against the backdrop of "news," is FEZ (Euro Stoxx 50) (49/21). However, I previously attempted to get a fill of an iron fly before the primaries, and it was quite pesky, particularly on the call side. Currently, I'm unable to get a mid price quote for the June 9th 34.5/37.5/37.5/40.5 iron fly or a similar setup in the June 16th expiry due to the fact that the long calls where I want to set up are no bid. With FXE (the Euro proxy), which I tend to play as I would play EURUSD, I would go directionally short. The background implied volatility is so low that it just doesn't make sense as a straightforward premium selling play since the contraction that's usually a feature of these plays is likely to be minor; moreover, I have a directional assumption in a tightening Fed environment versus a loose to easing ECB environment (bearish). There are a couple of ways to play it: (a) ATM short call verts where the break even is around 106 (e.g., the June 16th 105/108 short call vert; 1.20 cr; BPE 1.80; BE at 106.20), legging in small in the event it rips higher on a Macron win (currently, the likely outcome); (b) a call diagonal that gives you some flexibility on the short call side of things (e.g., a June 16th 107 short call; Sept 15th 110 long call; .07 cr; 2.93 BPE) without exposing you to downside risk in the event that the Euro caves in at some point on dollar strength or Euro weakness. Lastly, I've got eyeballs on oil. It's dipped somewhat dramatically off highs, so I'm looking at various bullish plays in OIH, XOP, and/or XLE, all of which track oil prices somewhat religiously. Currently, I'm still working an XOP put diagonal, but am amenable to getting into another XOP play. (Put diagonal: XOP June 16th 33 short put; Dec 15th 27 long put; .10 credit at the mid; 5.90/contract BPE; PMCC: XOP June 16th 37 short call/Dec 15th 24 long call; 10.82 db).
AMEX:EWY
by NaughtyPines
OPENING: XOP APRIL 21ST 33.5/JUNE 16TH 30 PUT DIAGONAL... for a .03 db. At its outset, you short put is basically completely "financing" the cost of your long put (but for the $3 it cost to put the trade on). Your goal is to roll the short option forward for duration, collecting credits along the way and to exit the setup for a debit that is less than what you collected in credits (as you would do with any credit spread). Unfortunately, the metrics of such a setup are indeterminable, although it does cost about $350 in BP to put on. A number of things can potentially happen during the life of the setup, and the credits received for any roll of the short put are unknown. Basically, however, I'm going to work the short put as I would a naked, but with the benefits of the long option keeping the risk defined ... .
AMEX:XOPLong
by NaughtyPines
THE WEEK AHEAD: FDX, NKE EARNINGSWith fourth quarter earnings announcements trailing off majorly here, there isn't much in the way of earnings to play, with the earnings of note for premium sellers being FDX, which announces on 3/21 after market close, and NKE (same). FDX is toward the top of its implied volatility range over the past six months (85), with NKE in the 63rd percentile over that same time period. However, background implied volatility in FDX isn't that great (29); neither is NKE (25), so the question remains whether a volatility contraction play in either of those will be particularly productive from a dollar and cents standpoint. Preliminarily, the FDX March 31st 177.5/182.5/207.5/212.5 iron condor plays 1.23 at the mid, somewhat short of the one-third the width of the wings I look for in these plays. With NKE, I would probably either go short strangle or narrow short strangle/iron fly, with the defined risk March 31st 54.5/57.5/58.5/61.5 bringing in 1.69 at the mid, which is also a bit shy of the one-quarter the width of the longs (7 wide) I like to see in an iron fly. Elsewhere, VIX continues to trundle on far below its long term one year (13.9) and three-year moving averages (15.4), extending a sub-15 drought that's been in place since mid-November of 2016, and no liquid exchange-traded fund has the metrics I want to see for a play (>70% implied volatility rank (6 month); >35% implied volatility). I've also been looking at bullish directional plays in either XOP, GDX or both, with my preference being for diagonals to allow me to work the short put over a period of a time rather than doing them as "one off", single expiry credit spreads. Examples: XOP April 21st 35 short put/June 16th 31 long put diagonal; GDX April 21st 21.5 short put/June 16th 19 long put diagonal. Both of these would be put on for a small credit, and I'll post these ideas separately.
NYSE:FDX
by NaughtyPines
XOP -- BROADLY RANGEBOUND BETWEEN 32 AND 41With November OPEC talks designed ostensibly to hammer out proposed output cuts being the binary event for oil in the near-term, I'm looking to either (a) add to bullish positions in petro if those talks fail to result in meaningful cuts (I'm skeptical); or (b) hang on to my current bullish petro plays for the ride higher if those talks actually result in something. That "something" could run the gambit from a freeze at current levels, to modest output cuts, to deep production cuts. Previously, most of these talks have resulted in failure, so my money's on nothing really meaningful occurring that puts a major dent in the current glut. That being said, even a modest, non-glut relieving cut could signal to the market that there has been "some progress" over previous meetings, driving the price higher. XOP has been broadly rangebound over the past several weeks between 32 and 41, so I'm looking to add to bullish positions via naked short puts or short put verticals at the 32 strike or below. Currently, XOP Dec 16th 32 short puts will bring in .50 ($50)/contract at the mid price; naturally, if price retraces somewhat on poor OPEC output cut talk, those strikes will increase in value, so patience is everything ... . If price drives higher, I'll just hang onto the long petro positions I have on now and wait for a better opportunity to add to or reestablish bullish oil positions.
AMEX:XOP
by NaughtyPines
WEEK OF 9/25: IV REMAINS IN GOLD, MINING, PETRO SECTORSWhile broad market implied volatility has basically been absent (we had one VIX pop to ~20 on 9/12, after which it has receded dramatically), it has remained in the same place as it has for the past several weeks -- in gold, mining, and oil and gas, with a smattering of high IV in individual biotech issues. Here are the top high IV stock and ETF options as of Friday close, screened for good liquidity: NVAX (biotech) (134.9%) VRX (biotech) (80.0%) GPRO ("gadgets") (80.0%) WLL (oil and gas) (79.9%) CHK (oil and gas) (79.4%) CLF (mining) (73.1%) AG (silver miner) (70.8%) AMD (semicon) (68.9%) TWTR (66.5%) (M&A rumor) ESV (oil and gas) (65.2%) GDX (gold miner ETF) (42.8%) XME (mining ETF) (37.6%) XOP (oil and gas ETF) (36.9%) In comparison, SPY implied volatility currently stands at 13.1%; DIA, 13.2%; QQQ, 14.7%; and IWM, 17.7%. Unfortunately, this makes selling premium a touch frustrating here (at least for me), since I'm already in NVAX, CHK, WLL, CLF, AG, AMD, and GDX, and there is some correlation between GDX and XME, so I don't necessarily want to pile into more individual miners -- whether they be gold, silver, or otherwise. Additionally, I think my "petro boat" is fairly full here, too. At least for me, it's probably a bit of hand-sitting (although I could "dabble" with GPRO or VRX) until something pops to the forefront ... . In any event, can't hurt to have dry powder running into these "little elections."
AMEX:GDX
by NaughtyPines
STRATEGICALLY ACQUIRING POSITIONS IN STOCK USING OPTIONSOver the years, I have been strategically acquiring stock in SPY and selling calls against to reduce my cost basis in that stock. However, given the fact that SPY looks a bit "stretched" here, I thought I would look to be a little smarter about acquiring and look to "divide and conquer" the market by acquiring in individual sectors instead of the market as a whole. The SPDR "X" series exchange traded funds are a good way of doing this, since they are generally liquid and cover most of the bigger market sectors that I would want to acquire actual stock in. For purposes of this example, I'm looking at XOP, which currently has the highest implied volatility of the "X" series. (This isn't saying much at the moment; it's been far higher, so this may not be the ideal point at which to sell a put, just to be clear). Ordinarily, in looking at a "strategic acquisition," I sell the 25 delta put, which is basically the one at the edge of the expected move for the expiry, and usually it's the expiry as close to 45 DTE as I can get. In this case, that's the Sept 30th 35 short put, which is currently paying a premium of .66 ($66)/contract at the mid. If price is below 35 at expiry, I am put 100 shares of XOP, after which I begin to sell calls against to reduce my cost basis. However, if price is above 35 at expiry, I keep the $66 in credit I obtained when I sold the put. Occasionally, I will just let the short put sit there and if I get put the shares at $35, I get put the shares. However, I find it equally acceptable to say to myself during the trade, "Well, now I'd like those shares at a lower price, because it seems inclined to move way below my short put strike and why should I pay more for the shares ... ." In that case, I generally roll the put down and out for duration, looking for an expiry in which I can do that and still get a credit, doing so repeatedly until I'm satisfied with the price at which I'll be put the stock or until I can exit the options trade in profit.
AMEX:XOP
by NaughtyPines
SUB-15 VIX SPELLS A CONTINUATION OF THE BREAK IN PREMIUM SELLINGUgh. In spite of abysmal non-farm payrolls, the week ended with the VIX still in sub-15 territory, meaning that less than 45 DTE premium selling in the broader indices is "off the table" for another week in the absence of something earth-shaking occurring in the markets here. This could come in the form of the most recent "Brexit" referendum poll, which shows the "Brexit" vote moving into a narrow lead over the "Bremain" constituency, albeit with a fairly large number being currently undecided (43% Brexit; 40% Bremain; 17% unwilling to commit to a camp). (GPBUSD is off 100+ pips in early Asian trading; the Euro, largely unfazed). Aside from broader market instruments, there is nothing popping in the ETF space or in individual underlyings for me to play. My "picky" standards are for an implied volatility rank of 70% plus, a greater than 50% implied volatility, and relatively high options liquidity, and there hasn't been an underlying that meets those criteria in several days. GDX and GDXJ, however, continue to flirt with an implied volatility rank in the 50-65 range, which could easily have them pop to the forefront here and make them playable in the next several days depending on what happens with gold here (it popped on the poor non-farm's). And so, I continue to watch for a bit and manage the trades I've got on now. Here's what I'm gandering at: FXE/EURUSD: With the Euro, I'm looking for price to revisit 1.14+ to get in short via an FXE directional play (so pissed that I missed that spike to EURUSD 1.16), but I want to wait and see how the Brexit uncertainty plays. TBT/TLT: People just don't want to give up their treasuries here, in spite of the fact that we're quite close to all-time highs in the S&P. In a tightening environment, the general notion is to short treasuries, but if TLT is here at this point in the S&P's trajectory, where's it going to be if the market engages in a modest corrective dip? Higher, so best to wait for TLT to digest the crappy non-farm's for a directional play short or, inversely, a directional play long in the inverse TBT. VIX/VIX Derivatives: The long vol trade has been disappointing, to say the least, in the short term. Volatility has absolutely caved and contangoized instruments like VXX and UVXY have given up even more. However, there still might be long vol opportunity here, but I'm going to be awfully picky since I already have some long VXX trades on. I'm still looking for the golden sub-12 "moment" in VIX to go long in that instrument with something akin to what I set up in VXX -- a poor man's covered call with the back month far out in time and deep in the money and the front month at the 75% probability out of the money strike. Naturally, we may never get there ... . Oil: I'm looking for short opportunities if I can get them or, in the alternative, a premium selling play on high implied volatility in one of the oil ETF's (XOP, OIH). It looks sideways or consolidative here, and the implied volatility in the ETF's I ordinarily play isn't enough to bother with yet ... .
CBOE:VIX
by NaughtyPines
/CL-USOIL -- WAIT FOR EMA CROSS + SUPPORT BREAK BEFORE SHORTINGIf you're into oil, my guess is that you're hot to short the stuffing out of this instrument in the vicinity of this $50 level. Me, I'm waiting for a couple of different things to happen. Here's why: First, oil's been an somewhat of a tear (albeit, sputtering in places) off of the April low of 35.22. Shorting here would be against the trend, which has been bullish. That being said, the upside reward here is somewhat indeterminable, and if you try to do any reading on the subject, there is speculation all over the place as to where price moves from here (e.g., "Saudis don't want >$50 oil, since this brings the spectre of shale piling back into the market"; "Shale is primed to ramp back up on >$50"; "Shorters, feeling the pain on misgauging the 'top,' are bailing here, their egos crushed", etc.). Secondly, it simply doesn't look like a breakdown is imminent, with the short and long EMA's angling upward, and it could very well flop around in a fairly narrow range (as it is want to do for annoyingly long substantial periods of time). Third, an OPEC meeting is right around the corner. Although not much is likely to happen during the meeting, the fact that "nothing happened" may actually move the markets, since the Saudis are likely to continue to embrace the status quo (which is basically that they will not be the last kids on the block to pump their petro out of the ground and won't agree to anything that makes them the "last kids"). If they don't or if something else comes out of the meeting (which would be an event of miraculous proportion), I certainly don't want to be on the wrong end of things, which is why I'm patiently waiting here. From purely a charting standpoint, I'm looking for a cross of the 8 and 34 EMA's on the 4H, followed by a break of significant support (which I kind of see at 47-ish) to short on lower time frames (1H or lower) on a retrace to the "slow" EMA or, alternative, an underside test and subsequent rejection of 47 with my eye on taking profit at 43 or, at the very least, peeling some off there and/or moving my stop loss down significantly into profit to allow the trade to run if it appears there's going to be continuation through that level. As an alternative to trading /CL directly or USOIL, I'm also looking at oil proxies like XOP and OIH for possible bearish assumption option setups (short call verticals or long put verticals) or USO to trade any /CL breakdown should it occur. If I spot any "juicy" option setups in these instruments, I'll be sure to post those separately ... .
FX:USOILShort
by NaughtyPines