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LULU

THE WEEK AHEAD: CHWY, LULU, COST, ORCL EARNINGS; EEM, VIXEARNINGS: It's a fairly light week for earnings, but there is some highly liquid underlyings to play for volatility contraction: CHWY (--/74): Monday, After Market Close. LULU (64/42): Wednesday After Market Close. COST (44/23): Thursday, After Market Close. ORCL (42/26): Thursday, After Market Close. Pictured here is a CHWY January 17th 21 short put at the 20 delta, paying .78 at the mid price as of Friday close with a 20.22 break even. In this particular case, I'm not looking to play earnings for volatility contraction, but waiting for earnings to pass, as well as lock up to end, which is supposed to occur on the 11th (Wednesday) with a whopping 83% of outstanding shares subject to lockup. Depending on what happens with the share price at the end of lock up, as well as implied volatility, I will look to put on a play thereafter. The only other play I'm potentially interested in is LULU, where the January 17th 190/200/260/270 iron condor is paying 2.61 with delta/theta metrics of -1.69/5.35. It's not a one-third the width setup, but LULU has had a tendency to move, so my inclination would be to go wider to stay clear of potential friskiness. EXCHANGE-TRADED FUNDS: UNG (55/54) TLT (44/13) USO (21/30) GLD (19/10) GDXJ (18/27) With the possible exception of UNG, shorter duration premium selling isn't ideal here, with rank below 50% and 30-day below 35%. As an interesting aside, however -- compare and contrast premium selling in UNG and USO versus trading /NG and /CL directly, using at-the-money short straddle pricing: UNG January At-the-Money Short Straddle: 2.68 versus 18.03 (14.9%) /NG January At-the-Money Short Straddle: .309 versus 2.25 (13.1%) USO April At-the-Money Short Straddle: 1.75 versus 12.32 (14.2%) /CL March At-the-Money Short Straddle: 6.76 versus 59.07 (11.4%) BROAD MARKET: EEM (8/16) QQQ (7/16) IWM (6/16) SPY (2/13) First Expiries in Which At-the-Money Short Straddle Credit Exceeds 10% of Value of Underlying: EEM: June: --4.48 versus 43.07 (10.4%) QQQ: June -- 21.49 versus 205.00 (10.5%) IWM: September -- 20.05 versus 162.83 (12.3%) SPY: September 34.46 versus 314.87 (10.9%) As with the exchange-traded funds, short duration premium selling isn't paying here, so your choices are to hand sit or sell in higher implied volatility expiries farther out in time. I've been largely opting for the latter, while simultaneously exercising some restraint as to sizing, since the last thing you want to do is tie up buying power with longer-dated setups, only to have literally nothing left over to take advantage of shorter duration volatility pops. Secondarily, I've been managing these longer-dated setups more aggressively, taking them off in profit in many cases a good deal short of 50% max. FUTURES: /6B (60/12) /NG (55/58) /CL (21/29) /6E (20/5) /GC (19/10) As with the exchanged-traded funds, volatility is in natty and oil with /NG paying in short duration (January). One thing I noticed is that /CL expiry-specific premium selling doesn't necessarily lend itself to going longer-dated (at least at this moment in time) since implied is about the same regardless of where you go (i.e., January: 28.9%; February: 29.5%; March: 29.3%), so all you're basically getting paid for is duration, as compared to -- for example -- expiry-specific implied in SPY, which generally increases incrementally over time (i.e., January: 14.5%; February: 15.7%; March: 16.8%, etc.). This is not necessarily a bad thing, just an observation of what you're getting by going out farther in time with /CL options versus other instruments that have a sort of expiry-specific implied volatility "term structure." VIX/VIX DERIVATIVES: VIX finished Friday at 13.62, with /VX futures contracts trading at 16.32, 17.51, 17.63, and 18.19 in January, February, March, and April respectively. Consequently, the contango environment remains productive for term structure trades in those expiries, although it's apparent that you won't get much trading February over January due to the fairly small differential between where those two contracts are trading at the moment. In practical terms, the February 17/19 short call vertical is paying .65 with a 17.65 break even versus 17.51; the March 17/19, .65, with a 17.65 versus 17.63. In other words, it doesn't pay to go longer in duration (February versus March) here ... . As before, I'll look to put on bullish assumption plays in VXX or UVXY at extreme lows (these setups don't work well in VIX directly due to /VX term structure) and add bearish assumption in VIX, VXX, and/or UVXY on VIX pops to greater than 20 on top of any VIX term structure trades that I'm working ... .
NYSE:CHWY
by NaughtyPines
Lululemon (LULU) moves off Trendline Support and Breaks HigherLULU has been rising in a trend channel since April. The price recently pulled back to channel support and then consolidated there. On Oct 10 the price broke above the consolidation signaling a long entry. The chart shows two trade scenarios. One is entering when the price breaks above the consolidation. This trade has a 6:1 reward to risk based on the estimated exit (top of channel). Spotting the channel and the consolidation would have alerted a trader to be on the lookout for an upside breakout. I posted this on Oct 9 in my free Facebook swing trading group (www.facebook.com). An order could have been placed to enter when the price broke above the consolidation high. The other scenario is a late entry near the closing price on Oct 10. Still a good trade potentially, but the reward:risk drops to about 3:1.
NASDAQ:LULULong
by CoryMitchell-CMT
$LULU: Swing Trade to all time high. Ride the wave!$LULU has been an exceptional stock; going up 79% the past year. We have a potential setup occurring for a profitable swing trade. What to watch (1 week time frame): - We see an incomplete head and shoulders - right shoulder can reach all time high (shown above). - Ichimoku cloud shows bullish for next weeks or month to come - We will see the stock move higher before lower. - Watch for a bounce on the 26 day avg line or Ichimoku Cloud Span A. -Be patient and enter only if a bounce occurs around the 130-140 levels. We have identified the long term trend, found an entry point and exit point. Now RIDE THE WAVE. Most important of all, BE PATIENT . Trade at your own risk.
NASDAQ:LULULong
by Litwolf