XOP trade ideas
Approaching supportHas been blasted over the last two months. Expecting a pull back from support over the next month, as produces cut back to regain control of oil prices. Stop loss at 28. Target 1 32+ final 36+
Long from 31.34Stop loss at today's low. Oil is finding support with Broder markets finding support after today's sell off. XLE forming a potential triple bottom. Target 1 is 18 day moving average, target 2 is 38.
THE WEEK AHEAD: XOP, OIH, USO, XLE, UNG, EEMEarnings With >70 Rank/>50 Implied:
No underlyings with highly liquid options with earnings announcements in the next week. With single names with earnings announcements in the rear view mirror, we're looking at earnings starting up again in the January cycle; I'd rather just play those closer to the announcement, rather than get caught up in a volatility expansion (e.g., CAT (84/40) with earnings in 53 vs. January opex 47 days until expiration).
Exchange-Traded Funds With >50 Rank/>35 Implied
XOP (81/44)
OIH (81/43)
USO (81/57)
XLE (75/27)
UNG (75/88)
Notes: As you can see by the pictured setup, XOP is at the bottom of its 52-week range. With OPEC talks right around the corner (and likely jawboning to ensue), I'm slightly enamored with a bullish assumption setup here as compared to a nondirectional premium selling play, even though there's premium to be had (the Jan 18th 29/37 short strangle's paying 1.09 with a 70% probability of profit). Last week, I entered into a similar setup in OIH, (See Post Below), since it's gotten the sledge hammer to a greater degree than the rest of the petro-sensitive exchange traded funds.
In any event, here are the metrics for the pictured play: Max Loss on Setup/Buying Power Effect: 4.02 debit/contract; Max Profit on Setup: 1.98/contract; Break Even on Setup: 33.02 vs. for a 6-wide, BE at 33.02 vs. 32.81 spot; Debit Paid/Spread Width Ratio: 67%. Look to roll the short call aspect out on significant loss of value (usually 50% max) and to take profit at 50% max (.99/$99 per contract).
UNG has been pesky. I've looked at getting into a bearish assumption, seasonality-related short setup, but every time I look, the markets are stupid-wide, making it unattractive from an entry/exit perspective. Given its high rank/implied, however, it might be amenable to a bearishly skewed oppositional setup if you're willing to do a bit of price discovery and not settle for sub-mid price nonsense: the Jan 18th 27/46 short strangle is paying 2.92 at the mid with a net delta metric of =25.44 and break evens at 24.08 and 48.92, which covers a fairly huge swath of the 52-week range. If you're willing to spend a little more time in the trade, the April 18th 26/46 pays 4.91 at the mid, is =29.44 delta, and has break evens of 21.09 and 50.91, although I could see the reluctance to hang yourself out there undefined given the movement it's experienced over the last several weeks.
Broad Market Exchange-Traded Funds Ranked By 30-Day Implied
EEM 26
QQQ 24
IWM 20
SPY 18
EFA 18
Notes: The EEM Jan 18th 41 short straddle is paying 2.69; the ~30 delta, 39/43 short strangle pays 1.15. I've been working it via double diagonal with a short straddle body, just so I don't have to leg into and out of the long strangle aspect and to budget buying power devoted to the trade. (See Post Below).
CLOSING: XOP 30/32/2X35/2X35.5/2X39.5 IRON CONDORClosing the remainder of my December cycle XOP core position for a 4.61/contract debit.
Although I'm closing these particular spreads at a loss, I'm green for the December cycle in XOP, given my scratch point of 5.15, resulting in a .54 ($54)/contract profit. This isn't very stellar, but I'll take it given the header oil took off of 2018 highs ... .
Rank/implied remains high here, so I'll look at re-upping in the January cycle.
OPENING: XOP 2 X DEC 21ST 35.5/39.5 SHORT CALL VERTICAL... for a .40/contract credit.
Notes: This will finish my clean up of my XOP December cycle core position. (See Post Below for all the shenanigans). I've now got "unit balance" (same on put side as on call side), as well as a smaller number of units in total.
My scratch point in the position for the December cycle is 5.15/contract, and the net delta of the position remains long running into opex. I'm profitable for the cycle in the underlying, but would like to milk out a little more, particularly since we may get some OPEC jawboning running in their December meeting (i.e., up), which will naturally benefit what remains of the position.
CLOSING: XOP DEC 21ST 28/31/35/40 IRON CONDOR... for a 1.12/contract debit (1.04 profit/contract).
Notes: Further clean-up of my XOP core position in December. Now that I've taken off the 38/41 short call vertical and this iron condor, what remains is two short put verticals, one at 32/35, the other at 30/35. The 32/35 was left over from an iron condor I put on previously, the 30/35 from an iron fly, the call side of which I just closed. The 32/35's a three-wide; the 30/35, a five-wide (for a total of eight wide), so I'll look to sell a 2x4 wide in the December cycle to balance units running into expiry.
CLOSING: XOP DEC 21ST 38/41 SHORT CALL VERTICAL... for a .11/contract debit (.30 profit/contract).
Notes: Here, I'm just cleaning up my XOP core position a little bit ... .
CLOSING: XOP DEC 21ST 39/42 SHORT CALL VERTICAL ... for a .12/contract debit/.44 profit per contract.
Notes: Here, I'm taking a little call side off in profit from my XOP core position. Naturally, this leaves me "imbalanced" from a unit perspective (more put side than call) and doesn't help the position's current long delta, but I'll look to put some back on if there's a bounce ... .
OPENING: XOP DEC 21ST 28/31/38/41 IRON CONDOR... for an .83/contract credit.
Metrics:
Max Profit: .83 ($83)/contract
Max Loss/Buying Power Effect: 2.17 ($217)/contract
Break Evens: 30.17/38.83
Delta: -.55
Theta: 1.73
Notes: An adjustment trade, primarily to add some additional extrinsic value to my XOP core position with XOP rank/implied still being high (100/42), as well as some short delta (it was shorter when I put it on, but price has continued to erode). I didn't quite collect one-third the width, primarily because I have to "squeeze" it in amongst the various spreads I already have on in the December expiry. As with my SPY core position, I'll look to mix and match profitable short put side with profitable short call side as we run into expiry and/or take the entirety of the position off in profit.
Doji under BollingerLong based on doji formed from support line. Lots of negative momentum has been stopped temporarily. Tight stop will be in place with a direction to be determined like the overall markets after the midterm elections. Anticipating positive movement before the elections as long positions are taken for a short rebound, opposed to a longer downtrend which will offer a much longer window to capture gains if the downtrend continues.
CLOSING: XOP 30/33/41/44 IRON CONDOR... for a .72/contract debit (.38 profit/contract; 34.5% max).
Notes: As with my SPY core position, I'm mixing and matching profitable short put side with short call side of oppositional setups that I put on over time to take off some risk, book some profit, and (where possible) to get a bit of delta adjustment where I need it. (Here, I pick up a smidge of needed long delta by closing this out, since price of the underlying has moved to the call side of the pairing). This also has the side benefit of allowing me to recenter a setup in the underlying if I want to and/or frees up buying power to make an adjustment trade if necessary.
XOP - Energy SpiderWhats up Traders -
Energy, due for continued downtrend. Expecting XOP to continue down trend channel.
Puts are a nice trade here.
Short XOP (After potential bounce next few weeks)XOP the same set up as XLE. My indicator has broken the upward trendline before price breaks the triangle.
I expect the price to move up a little next few weeks so as my indicator to retest the broken TL. If my indicator fails to break above, then look to short it hard.
TP: 12
OPENING: XOP DEC 21ST 32/35/41/45 IRON CONDOR... for a 1.10/contract credit.
Metrics:
Max Profit: 1.10 ($110)/contract
Max Loss/Buying Power Effect: 1.90 ($190)/contract
Break Evens: 33.90/42.10
Delta: -1.25
Theta: 1.08
Notes: Going Plain Jane, delta neutral iron condor (although you can certainly short strangle it, too) in relatively high implied (rank 62/implied 32. Will look to take profit at 50% max.
OPENING: XOP NOV/JAN 42/48 DOWNWARD PUT DIAGONAL... for a 4.19/contract debit.
Metrics:
Max Profit: 1.81/contract
Max Loss/Buying Power Effect: 4.19/contract
Debit Paid to Spread Width Ratio: 4.19/6.00 = 69.83%
Break Even: 43.81
Theta: .72
Delta: -42.45
Notes: Going split month downward put diagonal/synthetic covered put here at or near 2018 highs.
TRADE IDEA: XOP NOV 16TH 41 SHORT/MARCH '19 50 LONG PUT DIAGONALMetrics:
Max Loss/Buying Power Effect on Setup: $636/contract
Max Profit on Setup: $264/contract (41.54% ROI at max; 20.75% at 50% max)
Break Even: 43.64 versus 43.58 spot
Debit Paid/Spread Width Ratio: 70.7%
Theta: .84
Delta: -54.75
Notes: I'm not going to put this setup on quite yet, as I would prefer that the price of the underlying be "at the top of the box" (~44.50), but always like to price potential setups out ahead of time and then tweak them a little bit as price of the underlying may dictate. I generally start out looking at these directional setups with the front month short option at the 30 delta and then adjust the back month long so that the break even is as close to the spot price as possible. Additionally, I like to pay less than 75% of the spread width, so that 70.7% debit paid/spread width ratio is a decent metric. You can naturally go shorter in time with the back month (which will result in a cheaper setup), but I like to give myself plenty of time to reduce cost basis in the setup over time with rolls in the event I don't get the movement I need to exit the trade fairly quickly.
As far as trade management is concerned, look to take profit at 50% max, Roll the short put out on significant loss of value (usually 50%), and then recalculate your scratch/take profit targets ... .
OPENING: XOP OCT 19TH 39/44 SHORT STRANGLE... for a 1.31/contract credit.
Probability of Profit: 64%
Max Loss/Buying Power Effect: Undefined/5.95/contract
Max Profit: 1.31/contract
Break Evens: 37.69/45.31
Theta: 2.53
Delta: -4.15
Notes: Shooting for 50% max; adjust at skew out to +/- 30 delta.
