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Nakedshortput

EARNINGS PLAY: ANF NOV 25TH 14.5 SHORT PUTPutting this on a touch early ... . High implied volatility rank/high implied volatility in advance of earnings. I'm looking for a volatility crush after earnings announcement and, of course, bullish or sideways movement ... . Metrics: Probability of Profit: 74% Max Profit: $48/contract Max Loss/Buying Power Effect: $1402 (assuming the stock goes to 0, and you do nothing); buying power effect is broker dependent) Break Even: 14.02 Notes: I'll watch this closely. If I get bullish movement plus an ensuing volatility collapse, I'll look to take it off near worthless. Alternatively, if it breaks the short put, I'll roll it out for additional credit, as I'm not particularly interested in owning the stock.
NYSE:ANFLong
by NaughtyPines
TRADE IDEA: VRX NOV 18TH 17.5 SHORT PUTOkay, so there's other "big pharma" that I like wayyy better than Valeant (e.g., BMY, GILD). The problem is that BMY and GILD are more expensive and don't have the implied volatility that VRX has (for obvious reasons: they don't have as many "warts" as VRX). Nevertheless, I'm watching VRX here because its implied volatility is so high (>100%), which makes relatively far out-of-the-money short puts comparatively rich in premium. Here, I'm eyeing the 17.5 short puts for obvious reasons -- that strike is below historic lows for this poo pile. Moreover, with an implied vol of >100%, I can get .83 ($83) in credit per contract "at the door," which makes it quite attractive for an underlying at this price. The notion here would be to either (a) keep the premium; or (b) get put the shares at 17.5, after which I would sell calls against (covered call).
V
by NaughtyPines
OPENING: EXEL NOV 18TH 11 SHORT PUTHere, I'm looking to sell a touch of premium in an underlying that has both high implied volatility rank (99.6%) and high background implied volatility (99.2%). Metrics: Probability of Profit: 70% Max Profit: $85/contract Buying Power Effect: Varies by Broker.* Break Even: 10.15 Notes: I'll shoot to take this off at 50% max profit. However, I could also see working it as a precursor to a covered call. For example, if price breaks 11 by expiry, I would either take assignment of the stock at $11/share (and then proceed to sell calls against) or roll the 11 down and out for additional credit and then look to take assignment at a more favorable price ... . * -- When I do naked short puts, I operate on the assumption that -- worst case scenario -- I will be assigned stock at the short put strike. Here, for example, I will need $1100 of buying power (100 shares x $11/share) per contract to accommodate the assignment of shares should that occur.
NASDAQ:EXEL
by NaughtyPines
TRADE IDEA: EWW NOV 18TH 46 SHORT PUTI've never played this particular broad market ETF, but it beats trading SPY et al. here, particularly since you can get a 1.00 in credit out of a short put in an sub-$50 underlying ... . Metrics: Probability of Profit: 76% Max Profit: $101/contract Max Loss: Undefined (it would be $4499 if the ETF went to zero and you did absolutely nothing) Break Even: 44.99 Notes: I'm not going to be putting on a trade in this, since I think there's downside risk associated with U.S. elections. However, at the very least, it's worth watching here. The IV and therefore the premium is higher here than in SPY, IWM, QQQ, and DIA ... . The downside is that it is not quite as liquid as those instruments.
AMEX:EWW
by NaughtyPines
NVAX TRADE UPDATEI figured I'd clean up this setup a little bit on the chart to show what's going on with this trade a little more clearly, since we're running into opex, and I'll have to do something with it here shortly. I also for mapping out what I'm going to do if price does certain things relative to my cost basis and original stock purchase price. The trade originally started out as a "Plain Jane" covered call, where I bought shares at 7.54 and sold the Sept 16th 8 call for something like a 6.39 debit (so my cost basis in the shares at that point was 6.39/share). I proceeded to sell the Sept 16th 5 short put to further reduce cost basis in my shares, as well as to sell some premium in this unusually high implied volatility underlying (I filled the short put for an additional .67 ($67)/contract credit. When, after all, can you get >$50/contract credit for a somewhat far out-of-the-money short put in an <$10 underlying -- rarely. After selling the put, my cost basis in the shares would be 6.39 minus .67 or 5.72/share. Currently, the 8 short call is valued at .72 ($72) (it was originally $115), and the short put is valued at .25 ($25) (originally, $67). Rolling into expiry, I'm looking to take the short put off at near maximum profit (.05 or less). If price finishes above $8 at expiry, my shares will be called away at $8, and I'll be out of the trade. However, what should I do if price either finishes (a) between my stock purchase price and the short call or (b) price finishes below my stock purchase price, but above my original cost basis for the covered call (6.93/share)? If price finishes "between", I'm likely to just treat the trade from that point forward as a straight "speculative long" stock play and set a stop loss for my shares at break even and then let the trade ride. The reason why I would probably not continue to sell calls against and set a stop loss on the stock is to avoid the scenario where I would get stopped out on the stock and have a naked speculative short call hanging out there which could get painful if price whips higher on news (which is due out sometime in the 4th quarter and most likely at a presentation NVAX is going to give in mid-October). If price finishes lower than what I paid for the stock originally, but above my cost basis for the original covered call, I'm likely to just close it entirely out, having made profit on the short put and on the covered call setup ... .
NASDAQ:NVAX
by NaughtyPines
6
OPENING: GPRO OCT 21ST 13 SHORT PUTHere, I'm just trying to suck in a little bit of premium without being all in on the stock ... . (Filled for a .64 ($64)/contract credit). As usual, I'm selling the strike nearest 30 delta. I'm fine with getting assigned at 13 (after which I'd proceed to sell calls against), but would naturally prefer cheaper, so will keep an eye out for opportunities to roll down and out for credit and duration if I get a shot at it. Naturally, the Oct 21st expiry is around earnings, so that's something I'll have to keep in mind ... .
NASDAQ:GPRO
by NaughtyPines
TRADE IDEA: XME OCT 7TH 24.5 SHORT PUTHaving the highest implied volatility of all the SPDR's currently, I'm looking to sell a small amount of premium here at the 30 delta strike approximately 45 DTE as a possible alternative to doing a covered call in a mining underlying (such as GDX, GDXJ, KGC, AUY, HL, etc.). Here are the metrics: Probability of Profit: 74% P50: 89% Max Profit: .66 ($66)/contract Max Loss: $2384 (if the stock went to 0 between now and expiration, and you did nothing) Buying Power Effect: $245/contract Break Even: 23.84 Notes: As with all premium selling setups, I look to take off the trade at at least 50% max profit. However, since this is a naked short put, I look to roll the option out for duration when the value of the put exceeds twice the credit received (which means price has moved toward the short put, such that its value has increased). When that occurs, I roll the short put down and out to a strike and an expiry in which I can receive a credit for the roll.
AMEX:XME
by NaughtyPines
TRADE IDEA: VRX OCT 21ST 25 SHORT PUTHere, I'm looking to sell some premium at or around the 30 delta strike (this one's at the 25 delta). Probability of Profit: 70% Max Profit: $132/contract Break Even: 23.68 Notes: The notion here is either to keep the premium received if price stays above $25 into expiration or roll the option down and out for additional credit if it doesn't. I'm not sure at this point that I want to be put VRX at 25 (lower, as always, is better, and I think 19-20 would be "swell", although we'll just have to see).
VLong
by NaughtyPines
TRADE IDEA: AMD COVERED CALL/NAKED SHORT PUTMy "guess" is that AMD will not hold onto this level (I briefly considered going "monied" with the short call with the covered call setup, selling the 7 strike instead of the 8). However. implied volatility is fairly high here (64.6%), and my mechanical approach to most of these setups is basically to "ditch the guessing" and pull the trigger; price will go where it goes ... . Covered Call Metrics: Buy 100 Shares at 7.51 Sell Oct 21st 8 Call Whole Package: 6.93 db (off hours; 6.93 will be my cost basis in the stock) Max Profit: $107 (if called away at 8) ROC%: 15.4% Notes: As an alternative, I looked at selling a put in the Oct 21st expiry below current price. The Oct 21st 7 short put, for example, currently offers up .54 ($54) in premium at the mid. The notion there would either be to (a) keep the premium if AMD finishes above $7 at expiry; (b) look to be put the stock at $7 if it doesn't; or (c) roll the short put down and out for additional credit if price breaks $7. Anything below the $7 strike in the Oct 21st expiry won't offer you much premium at the moment (e.g., the 6 strike offers .25 at the mid, which approaches "not worth it"). At NY open, I'll probably just "flip a coin" as to whether I go with the naked put or the covered call.
NASDAQ:AMD
by NaughtyPines
PREMIUM SELLING: TWLO OCT 21ST 45 SHORT PUTI generally don't like to ride broncos right out of the stall, but I might make an exception here ... . This is because the Oct 21st 45 short put is currently bid 3.00, ask 3.80 (mid 3.40). That's $340 in premium for a one contract 58 and change underlying ... . Alternatives: Sept 16th 45 short put: bid .95, ask 1.11, mid 1.03. Oct 21st 40 short put: bid 1.65, ask 2.10, mid 1.87. I wouldn't be looking to acquire here, but rather to just squeeze some premium out and would look to take it off at 50% max profit. Broncos can make for an awfully rough ride ... . Ordinarily, I'd strangle this, but am hesitant to take on potential upside risk if this becomes a rocket sled sorta thang ... .
NYSE:TWLO
by NaughtyPines
2
TRADE IDEA (PREMIUM SELLING): EWZ OCT 21ST 29.5 SHORT PUTHere, I'm just looking to sell a little premium in the highest implied volatility, broad market underlying there is out there at the moment -- the Brazil exchange-traded fund, EWZ. The Olympics, after all, are over, and no doubt body parts will be washing up again soon on Copacabana beach, PBR will be undergoing yet another corruption/fraud/you-name-it scandal, and there is, of course, that whole impeachment thing ... . Metrics: Probability of Profit: 71% Max Profit: $107/contract (at the mid) Breakeven: 30.46 Notes: I'm basically selling the ~30 delta strike here. I'll look to roll the option down and out for duration and credit if the price of the option equals 2x what I received in credit for it. Otherwise, I'll leave it alone and look to cover the trade at 50% max profit. Naturally, there's a lot of air below the strike, but I'm mentally prepared to have to roll it down and out for a period of time to get it to "work out" ... .
AMEX:EWZ
by NaughtyPines
TRADE IDEA: CDE COVERED CALL/NAKED SHORT PUTCovered Call Metrics: Buy 100 shares stock at 13.68 Sell Oct 21st 14 call Whole Package: 12.36 db Max Profit: $164 (if called away at $14) ROC: 13.3% Alternative: Sell Oct 21st 12 put Probability of Profit: 71% Max Profit: $70 (if filled at the mid price) Max Loss: $1140 (if you do nothing and stock goes to $0 by expiration) Notes: The short put play would be either a naked premium selling play or a precursor to initiating a covered call. For the former, look to roll down and out for duration and credit when the price of the short put equals 2x what you received in credit; otherwise, leave the option alone and look to take off in profit at 50% max or above. For the latter, take the assignment at 12 or roll the put down and out for duration and credit to shoot for assignment at a more favorable price. Given the underlying's trajectory and the amount of "air below", I'd probably opt for just selling the short put here. A lot of miners are looking somewhat weak here ... .
NYSE:CDE
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
NEXT WEEK'S "SHOPPING LIST" -- FEYE, ANFI, FIT, RTRX, MCRB(?)With broad market volatility abysmally low (VIX <12), it's a game of hunt and peck for "diamonds in the rough" in terms of premium selling. For the most part, I'm looking for sub-$20 underlyings here with high implied volatility for either selling naked puts (bullish assumption) or initiating covered calls where the purchase of the stock, combined with selling the first out-of-the-money call 30-45 DTE, will yield at least a 10% ROC if the stock is called away at the short call strike. The reason why I'm sticking with particularly low priced underlyings is (a) I don't want to tie up a bunch of buying power on these short-term (basically) engagement trades; and (b) don't want to take a lot of risk on dollar and cents wise. The max loss you can experience with an outright stock purchase, a covered call, and/or a naked short put is the risk associated with the stock going to "0"; less room to fall equals less room for loss. Additionally, the reason why I'm going covered call/naked short put over a short strangle/iron condor (my standard go-to's) is because you simply cannot get enough premium out of a short strangle or iron condor to make doing those on these low-priced underlyings worthwhile with those kinds of setups. With all that background in mind, here's what I'm looking at: FEYE: It announces earnings in a few days here, but the metrics are good enough to either go naked short put or to just dive right into a covered call. (Covered Call: 100 shares at 17.42; Sept 16th 18 short call for 1.54 credit; whole package, 15.95 debit; max profit 2.05 ($205); ROC 12.85%; Sept 16th 16 short put: 1.05 cr at the mid). ANFI: I've never played this little specialty foods company before. (Covered Call: 100 shares at 7.11; Sept 16th 7.5 short call for .75 credit at the mid; whole package, 6.70 debit; max profit .80 ($80); ROC 11.94%). This isn't the most liquid thing in the world, so whether the package is as "sexy" as it is in the off hours remains to be seen. FIT: This is a one trick pony, and I generally don't like one trick ponies; nevertheless, I'm glad to ride a one trick pony for a little bit if the premium is there. (Covered Call: 100 shares at 13.66; Sept 16th 14 short call for 1.23 credit; whole package 12.37; max profit 1.63 ($163); ROC 13.18%). RTRX: Another high volatility biopharma stock. I'd rather be put at $12 a share than $15, but the underlying is afflicted with odd-ball, $2 1/2 wide strikes to work with, so it's either 12.5 or 15 short put, if you decide to take that path. (Sept 16th $15 short put goes for 1.52 ($152) at the mid; Covered Call: 100 shares at 17.93; Sept 16th 20 short call for 2.30; whole package: 16.20; Max Profit: 3.80 ($380); ROC 23.5%). Unfortunately, the first short call strike above current price is at 20, so the underlying will have to move from 17.93 to 20.00 for you to get called away, so this might be a longer term sort of play than the others due to the short call's distance from current price. MCRB: This thing has tanked mightily, due to lackluster trial data on one of its drugs. There are other drugs in the pipeline, but the question is whether its losing some 70% of its value on Friday is a buying opportunity or the start of a long death spiral. Currently, I'm unable to get pricing on puts below the underlying's current stock price, so I'll have to take a look at it at market open.
F
by NaughtyPines
2
SOLD ACAD APRIL 15TH 11 SHORT PUTCredit goes to TurboTech for this particular idea, which passed under my radar ... . With an implied volatility rank of 89 and (yes, your eyes don't deceive you) an implied volatility of 259% , ACAD is ripe for premium selling. Here are the metrics for the setup: ACAD April 15th 11 short put Probability of Profit: 78% Max Profit: $111/contract Buying Power Effect/Max Loss: ~$990 (In this particular case, your max loss (which would occur if the stock went to "0") is the value of the strike ($11) minus the credit received for the short put ($1.11) or $9.89 times 100 shares or $989. Notes: I'm going to keep an eye on price here and may look to take it off at something exceeding 50% max if I can. It is, after all, $9 below current price and some $4.50 below the 52-week low ... . I put this on earlier today for $112, but it's possible that you could get a fill for more than that with this little down turn we had today.
NASDAQ:ACAD
by NaughtyPines