EARNINGS: JNPR, GRPN, AND TWTR (DIRECTIONAL PLAYS)A couple of other ideas for next week surrounding earnings ... . I like to have a lot of these ideas in the hopper so that I can price setups during regular market hours; some of these aren't as "sexy"/liquid during NY as they appear in off hours.
JNPR Dec 2nd 21 short puts; .45 cr at the mid (strike around long-term support). Earnings (10/25). I generally do these earnings plays with a short strangle or iron condor, but just can't get squat out of one of these strats in JNPR, so might as go directional.
TWTR Dec 16th 15 short puts; .60 at the mid (I'm more fixated on the 14 strike, since it's around long-term support). If I get a dip post earnings (10/27) that "juices up" the 14, I'll pull the trigger on that. Roll, roll, roll until a buyout rumor or until a buyout actually occurs. If it pops higher, I shrug my shoulders and say, "You doofus. You waited too long." TWTR has good metrics for my standard short strangle or iron condor, but I'm fixated on going directional here with the repetitively resurfacing buy out rumors which may, at some point in time, result in an actual buy out ... .
GRPN: Dec 16th 4.5 short puts: .31 at the mid. Earnings 10/26. That shortie is quite close into current price in the scheme of things, so this one would be a crap shoot. Either it takes off to the upside or look forward to getting put the stock at 4.5 (minus the credit you received on the front end). The good thing is that background IV is always fairly high, which would help with selling calls against.
Nakedshortputs
WHAT I'M LOOKING AT NEXT WEEK (10/24) -- BANC, EWW, XBIFocus in the short term (which is 25-45 DTE for me) will be on ETF's, although opportunities could crop up with earnings (still hoping for a TWTR dip post-earnings to go long via short puts).
Here's what came up on my high IVR/IV screen:
BANC, IVR's 100/IV 100. Options, however, are crappy (monthlies only), but you can get something decent for a 20 delta short put if you're willing to go all the way out to Jan (bullish assumption). The drawback -- in addition to the fact that it only has monthlies -- is that it's a bank. Banks generally aren't known for high volatility, so if you get put the stock, it may be difficult to write calls for something decent to reduce your cost basis if vol collapses at some point going forward here. Things like short strangles or iron condors (which would be vol contraction plays) are cumbersome due to the unavailability of dollar wide strikes.
EWW (the Mexican ETF) IVR 97/IV 32. The general play on this has been bullish on the assumption that Hillary will win, since that's good for Mexico (Donald has said he'll rescind NAFTA, which would be bad for Mexico). I could see further upside if Hillary wins, although it may have priced some of that in already. The Dec 18th 47 short put brings in .70/contract at the mid (bullish assumption; straight premium selling or precursor to covered call). Although this is not the most liquid thing in the world, nondirectional strats like iron condors, short strangles, and iron flies are also workable here.
XBI (the biotech ETF) IVR 88/IV 40. Biotech's been getting a bit of whooping here, and it may not be over, since the notion is that Hillary's bad for pharma and for biotech. She's not keen on high drug prices and has vowed to "do something" to lower drug costs (good luck with that). In any event, the Dec 18th 52 short put brings in 1.07/contract at the mid. (Bullish assumption; straight premium selling or precursor to covered call). A short strangle or iron condor/fly are also doable here.
GDX (GOLD MINERS ETF) -- A GOOD PLACE TO ADD/INITIATE LONG HEREWith gold hovering just north of 1250, having lost a good deal of luster to pesky Greenback strength, this is possibly a good place to add into current bullish gold positions and/or initiate one here.*
22 and change, after all, appears to be fairly long-term support for GDX, so I would look to add bullish positions via naked short puts or short put verticals at the 21 strike or below (the Dec 16th 21 pays .80/contract). The alternative is to wait to see if /GC 1250 holds up here or gives up the ghost on the increased probability of a Dec rate hike or the currently increased likelihood that the US Presidential election result will be in Clinton's favor, which is generally viewed as market bullish/risk off.
* -- I'm currently in a GDX covered call with a per share cost basis around 24/share and really only want to add position if it dramatically improves that cost basis. Not sure whether being put shares at 21 would do that, so I may thumb twiddle to see if we get something around 17.50. You never know, really ... .
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.
WITH VIX SUB-15, PREEM SELLING OPPS ARE OUSTIDE BROAD INDICESAs I've posted several times before, my preference generally is to (1) sell premium in broad-based index instruments (e.g., SPY, IWM, QQQ, SPX, RUT) if VIX > 15; and (2) if VIX < 15, look for premium selling opportunities in non-index exchange traded funds with implied volatility of >35% and/or individual underlyings with implied volatility of >50% and where the implied volatility percentage is in the 70th or greater percentile for the preceding 52-weeks. Unfortunately, VIX <15 here and underlyings -- whether exchange traded funds or individual underlyings -- with implied volatility both in the 52-week 70th percentile and above 50% implied volatility are absent here.
Consequently, I am "settling" for mere >50% implied volatility plays in exchange traded funds and in individual stocks. This isn't ideal, but I'm playing these small, keeping quite a bit of powder dry in the event that volatility does pick up at some point in the weeks ahead.
There are some opportunities out there, and they're where they've been for the past several weeks: in gold, miners, oil and gas, and biotech. The top IV individual stocks with liquid options are: NVAX (195.0) (biotech); RTRX (132.4) (biotech); GNW (100.3) (financial); WLL (80.5) (O&G); CLF (76.1) (iron ore/mining); AG (75.6) (silver miner); CHF (73.9) (oil and gas); AKS (70.0) (steel); EGO (62.7) (gold miner); VRX (61.9) (biotech); AMD (61.8) (semiconductor); and AUY (61.6) (gold miner). The top IV exchange traded funds are GDX (43.7) (gold miners); and XME (39.2) (mining).
And, because of the "smallness" of many of these underlyings (many are under $10), I'm taking a slightly different strategic tack here, either doing covered calls from the outset or selling puts as a precursor to a covered call, the notion being in the later case to either keep the premium or get put the stock at a lower price, after which I'll sell calls against. Things like short strangles and iron condors simply will not yield enough premium on setup to bother with in most of these smaller stocks.
In the one play that I currently have on in XME (see post below) that I could have strangled, I opted to just naked short put to leave open the option of covered calling it if I get put the stock or rolling the short put down and out for additional duration and credit should the underlying move that way rather than dealing with the hassles of call side risk. Naturally, these options would still be open to me were I to strangle, but doing just the short put relieves me of call side risk (there's always trade-offs).
For me personally, I'm looking to move into plays involving something other than gold, miners, or oil and gas, since I have quite a few of those on already. Unfortunately, this makes for pretty slim pickings in my little list, with the potential focus being on AMD and (ick) VRX. I'm already in NVAX and GNW, and I'm not fond of RTRX (it only offers monthlies and currently the Oct monthly expiry only offers 2 1/2 wide strikes; naturally, that may change ... ).
