THE WEEK AHEAD: DAL, WFC, NFLX EARNINGS; XOP, GDXJ, EWZEARNINGS:
A bunch of earnings next week, particularly in the financials sector:
C (40/58/14.1%): Tuesday before market open.
DAL (50/95/23.0%): Tuesday before market open.
JPM (38/49/12.1%): Tuesday before market open.
WFC (58/63/15.4%): Tuesday before market open.
GS (31/48/11.7%): Wednesday before market open.
EBAY (71/56/13.4%): Wednesday before market open.
IBM (47/43/10.0%): Wednesday before market open.
BAC (36/52/13.1%): Thursday before market open.
JNJ (29/28/7.2%): Thursday before market open.
MS (35/51/12.3%): Thursday before market open.
NFLX (50/60/14.5%): Thursday before market open.
From the standpoint of what the August at-the-money short straddle is paying, you appear to get the most bang for your buck out of DAL (23.0%), followed by WFC (15.4%) and NFLX (14.5%). Because so many financials are announcing, I did consider a short premium play in the sector exchange-traded fund, XLF (29/41/10.4%), but the August at-the-money short straddle is paying just a smidge over 10% of the stock price relative to WFC (15.4%), C (14.1%), BAC (13.1%), JPM (12.1%), and GS (11.7%), so it's potentially more worthwhile to go single name for the volatility contraction here and to look to WFC to get the most buck banging.
Unfortunately, strike granularity for WFC out in August remains pesky, with 2.5 wides where I'd want to set up my tent. For what it's worth, the 22.5/30 paid 1.42 as of Friday close, with the shorts camped out around the 23 delta.
To me, airlines remain a bullish assumption play from these levels, and DAL is no exception. Consider out-of-the-money short put: the August 21st 20 delta 22 is paid 1.06 as of Friday close or another bullish assumption setup such as a Zebra, buying 2 x the 70 delta calls and selling the 50, potentially calendarizing the setup so that you have more time to reduce cost basis (e.g., buy 2 x December 18th 23 calls, sell the August 21st 27).
Pictured here is a NFLX August 21st 455/465/680/690 iron condor with the shorts set up at the 16 delta as of Friday close. The market's showing wide on this setup, but look to get at least one-third the width of the widest wing (i.e., for a 10-wide, at least 3.33). You'll probably have to fiddle with the strikes given the amount of movement it's experiencing.
EXCHANGE-TRADED FUNDS ORDERED BY RANK AND SCREENED FOR >35% 30-DAY IMPLIED:
EWW (42/40/10.0%)
GDXJ 40/55/13.73%)
XLE (38/50/12.6%)
GDX (34/41/11.0%)
EWZ (29/48/12.1%)
SMH (26/36/9.2%)
XOP (25/61/15.8%)
USO (7/53/15.8%)
XOP (15.8%), GDXJ (13.73%), and EWZ (12.1%) have the most juice as a function of buying power ... .
BROAD MARKET:
Currently, no broad market with an August at-the-money short straddle paying greater than 10% of the stock price, but if you feel compelled to play, IWM (42/38/9.4%) is paying the most as a function of stock price.
IRA DIVVY-GENERATORS SCREENED FOR AUGUST SHORT STRADDLE PAYING MORE THAN 10% OF STOCK PRICE:
EWZ (29/48/12.1%) (Current Yield: 3.36%)
