KOREA SWING TRADE
I've made a lot of money in the powerful bullish market in Korea. This trade set up is very simple. If we see a bounce from current levels within the upward channel early next week, then I will get long.
EWY trade ideas
EWY breakout of its 7-year consolidation range. BullishEWY, the ETF that track South Korean index has recently breakout of its 7-year long consolidation range.
Bullish signal with target of 90.42 and stop at 64.42. Risk-reward 1:5.1
OPENING: EWY JUNE 16TH 58/63/63/68 IRON FLYEnded up going with the fly. Filled for a 2.59 credit.
Metrics:
POP%: 42%
Max Profit: 2.59/contract
Max Loss: 2.41/contract
BE's at 60.41/65.59
Theta: 1.54
Delta: -6.72
Notes: Shooting for something north of 25% max ... .
TWO EWY (S. KOREA ETF) TRADE IDEASI haven't traded this particular instrument before. For obvious reasons, now seems like a perfect time.
The first of the two trades is a short strangle, with the shorts set up at the ~30 delta strike:
JUNE 16TH 60/65 SHORT STRANGLE
POP%: 59%
Max Profit: $140/contract
Max Loss: Undefined
Break Evens: 58.60/65.82
Theta: 3.01
Delta: .78
The second's a defined risk trade using the same strikes for the short options as used in the short strangle:
June 16th 57/60/65/68 Iron Condor
POP%: 52%
Max Profit: $93/contract
Max Loss/Buying Power Effect: $209/contract
Break Evens: 59.09/65.91
Theta: 1.19
Delta: -4.16
Notes: I would look to manage either of these at 50% max. I considered one additional setup: a Reverse Jade Lizard: June 16th 59/60/64, where the 59/60 is a short put vertical and the 64, a naked short call. This yields a setup with a 70% pop, a max profit of 1.14/contract, a break even at 65.14, and no downside risk (since the credit received for the short call is > the max loss of the short put vert).
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).
Korean Market Pull BackEWY has gone on a huge run but pulled back lately due to concerns regarding the Syria missile strikes. It has lost about 5.5% from the highs but we are starting to see volume coming in here.
The combination of a geopolitical event that is indirectly related and volume increase makes me a buyer at these levels.
South Korea ETF (EWY) Turnaround Chart PatternThe South Korea ETF (EWY) has formed a classic turnaround chart pattern with a Rectangle Bottom break in March, and a break of the 200 day moving average in April.
The 50 day moving average is approaching the 200 day moving average from down below and a Resurrection Cross looks imminent.
The South Korea ETF (EWY) has outperformed by S&P 500 by +600% as of April 28 2015.
South Korea just beat on their GDP last week, growing 0.8% in Q1 2015. The consensus estimate was 0.6%.
South Korea is forecast to overtake France's GDP per capita by 2020.
Source: www.guerillastocktrading.com
Trader takes a Bearish Trade in EWYThe investment seeks to track the investment results of an index composed of South Korean equities. The chart looks weak and it seems as if it wants to break the Ichimoku Cloud to the downside. Today, a trader bought 2500 EWY April 58 Puts for $.85. Puts are bought for 1 of 2 reasons, 1. Speculation to the downside or a 2. Hedge against a long position. With this chart looking so weak, I think the trader thinks there is more potential downside and with the breakeven of this trade at $57.15 a trader thinks that EWY can take out the 52 week lows. I have no position in this stock right now, but will be looking to get short if I notice more bearish activity.
