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Shortstraddle

OPENING: OIH AUG 17TH 26 SHORT STRADDLE (LATE POST)... for a 2.36/contract credit. Metrics: Probability of Profit: 55% Max Profit: $236/contact Max Loss/Buying Power Effect On Margin: Undefined/$525/contract Break Evens: 23.64/28.36 Delta: -9.37 Theta: 2.1 Notes: Did this from my phone on Friday ... . Although I like to see >35% background implied volatility when pulling the trigger on these, at 30.3%, this isn't horrible. Will shoot for 25% max/roll at 24 DTE or on side approaching worthless.
AMEX:OIH
by NaughtyPines
BX - Looking for yield? Covered short straddle on Blackstone!THE DAWN OF ASSET MANAGERS As discussed towards the end of last year, 2018 should be the year of the brokers and asset managers (please watch related ideas below). In this context, and with a dividend yield of 6.36%, BX is probably one of the best asset management pure-plays out there. The trend has been strong on all time frames and the stock is attempting a breakout as we speak. But how to play it in the current top-ish market environment? There is a smarter way than a simple outright buy. LOOK FOR YIELD AND ENHANCE IT WITH OPTIONS 1. Buy the stock in a half size which makes sense to your strategy or portfolio at $34.91 (last close) 2. Sell one-year $40 OTM CALL and pocket $1.39 (indicative) 3. Sell one-year $32 OTM PUT and pocket $2.66 (indicative) COMPELLING RISK AND YIELD ANALYSIS At expiration of the options, in one year, one of the below should happen. 1. The stock is range-bound ($32-40): Stay long the stock and pocket (call premium + put premium + dividend yield) = 3.98% + 7.62% + 6.36% = 17.96% 2. The stock breaks out and trades above $40: Deliver the shares at $40 and pocket (capital gain + dividend yield + call premium + put premium) = 14.58% + 6.36% +3.98% + 7.62% = 32.54% 3. The stock breaks down and trades below $32: Receive the shares and end up with a full position at an average price of $33.45 while you pocket (dividend yield + call premium + put premium) = 6.36% + 3.98% + 7.62% = 17.96% . All the while, you become long one of the best asset managers in the world with an improved dividend yield >10%. THIS STRATEGY CAN BE ROLLED OUT WITH ANY TIME HORIZON (MONTHLY, QUARTERLY, SEMI-ANUALLY). COMMENTS WELCOME.
NYSE:BXLong
by HAL9000
RDSA Short Straddle brings in significant yieldThe current dividend yield on Royal Dutch Shell is 7.22% - Some of the highest yields out there. Combining this with a similar yield on the 7% OTM put, and topping it off with additional income from selling an OTM call, brings in an exceptional annualized yield in excess of 15%. The risk is to be long an oil asset in an uncertain oil environment. However, this is mitigated by the blue chip status of the exploration giant, as well as the over-sized dividend yield. I size the trade to the minimum options contract size (100 shares), but any multiple of that would work. I use actual prices from a trade just effected for a client. STRATEGY 1. Buy 100 shares of RDSA at 23.80 Euros/share 2. Sell 1 RDSA 15JUN18 E22 PUT at 1.52 Euros/share 3. Sell 1 RDSA 15JUN18 E26 CALL at 0.48 Euros/share INCOME 1. Options premium cashed in at maturity = 1.52 + 0.48 = 2.00 Euros/share 2. Indicative annual dividend to be cashed in = 1.72 Euros/share 3. Total cashed in annually = 2.00 + 1.72 = 3.72 Euros/share YIELD 1. Yield from options premium = 2.00/23.80 = 8.40% 2. Yield from dividend = 1.72/23.80 = 7.22% 3. Total income yield = 15.62% OTHER This strategy is also available in USD and GBP. If the stock goes down to the strike level and the shares are assigned to the investor, one would end up being long RDSA at a net price of 20.90 Euros/share (purchase price of the shares, less income from options and dividends in the first year) which is some 13% below the current price. On the up side, assuming the shares reach the call strike and the investor is assigned and delivers the shares at 26.00, the profitability of the strategy would be 9.25% excluding any accrued dividends at the time of assignment, and excluding the accrued value of the options premia at the time of assignment.
R
by HAL9000
1
THE WEEK OF 10/16: WHAT I'M LOOKING ATWhile I grind away on various covered call positions (I only have one covered call with an October short call on; the rest are in November or December), I'm looking ahead to some decent earnings for premium selling. Generally, I'm looking for underlyings whose implied volatility is above the 70th percentile for the past 52 weeks and that have background implied volatility of greater than 50% to play for a contraction in volatility immediately following the earnings announcement, with the go-to strategies being short strangles or iron condors. Currently, there are four underlyings with good liquidity options that announce earnings next week and whose volatility is above the 60th percentile for the preceding 52 weeks: IBM, NFLX, UA, and EBAY. I'm screening for >60 implied volatility rank at this point, since volatility in these could still ramp up to my >70%, meaning that they might be worth keeping an eye on. IBM -- Announces 10/17 after market close. The implied volatility rank is now in the 85th percentile. Unfortunately, the background implied volatility is far from being up to snuff at this point for me (28.3%). NFLX -- Announces 10/17 after market close. Implied vol rank: 64th percentile; implied volatility 56.6%. It's very nearly "there". Hopefully implied volatility pops a little more right before earnings. UA -- Announces 10/17 after market close. Rank: 62; implied vol 41.7%. Needs more. EBAY -- Announces 10/19 after market close. Rank: 93; implied vol 41.6%. Needs more. After I look at implied volatility percentile and the background implied volatility, I look at what I can get out of a setup. Generally, I'm shooting for a 1.00 credit for either a short strangle or iron condor, since I look to take these off at 50% max profit (i.e., a .50 ($50)/contract profit). Alternatively, I look at whether a short straddle or iron fly would make sense if the underlying is just too cheap to yield a decent enough credit. With short straddles/iron flies, I generally look to get 2.00 in credit at the outset, since I tend to manage those at 25% max.
NYSE:IBM
by NaughtyPines
NOTABLE HIGH IV STOCKS WITH IV > 50%1. P, 79% 2. FCX, 76% 3. X, 75% 4. TWTR, 67% 5. STX, 57% 6. ABX, 56% 7. NFLX, 56% 8 GG, 53% 9. SLW, 52% Naturally, we are coming into earnings season here, so there's a reason that some of these have high IV here (e.g., NFLX announces in a week and a half). Ordinarily, I like IV to be >50% and IVR (current IV's level relative to where it's been for the past 52 weeks to be high, too), but I may not find a great deal of 70%+ IVR plays here with broad market volatility so low (VIX finished the week below 15). Neverthless, it may be worthwhile to churn through this small list for premium selling plays (iron condors, short strangles, short straddes), assuming there's sufficient time before earnings to sneak a play in. Otherwise, it's probably best just to wait to do the standard volatility contraction play surrounding earnings ... .
P
by NaughtyPines
3
PREMIUM SELLING CANDIDATES FOR TUESDAY -- CY, HOG, POTWith broader market volatility bleeding out of the markets, I'm on the hunt for non-index premium-selling plays, and there are a few that have popped up on my radar. That being said, earnings season is nigh, so it might be best to be particularly selective as to individual underlying plays, keeping powder dry for the actual earnings, rather than pulling the trigger here such that you have to guide the setup around the actual earnings announcement. In any event, here are a few to look at: Individual Underlyings CY: implied volatility rank 100, implied volatility 78. The unfortunate thing about Cypress Semiconductor from a premium selling standpoint is its price, which limits the profitability of iron condor/short strangle setups. Where this is the case, the go-to is a short straddle. Preliminarily (looking at off hours quotes here), an August 19th 10 short straddle will bring in $228 in credit with break evens at 7.72 and 12.28, which would fit in nicely with CY price action. However, if you're looking to take the straddle off at 25% max profit (the usual goal for straddles), you're not looking at a tremendously great play here, even though these little "grounders" add up over time ... . HOG: implied volatility rank 100, implied volatility 63. Preliminarily, an August 19th 42.5/65 short strangle would bring in $168/contract, the drawback being that the underlying only offers monthly expirations ... . POT: implied volatility rank 70, implied volatility 51. Like CY, you won't be able to get much out of a play if you go short strangle or iron condor, leaving you with a short straddle as the go-to setup. The August 19th 17 short strangle will bring in $227/contract credit with break evens of 14.73 on the lowside, 19.27 on the topside which is not a bad fit for what POT is doing on its chart (essentially, sideways chop between 15 and 20). Exchange-Traded Funds The ETF space is not looking particularly attractive here, with the vast majority of them sub-50 in implied volatility rank. The one standout is SLV (coming in at 70), but you won't be able to get much premium out of an SLV play due to fairly low implied volatility (currently 34, which is fairly high for SLV), although it looks enticing for some kind of directional play (bearish assumption).
C
by NaughtyPines
TRADE IDEA: GPS JULY 1ST 17.5 SHORT STRADDLEOne of the few earnings plays this season that meets my >70 implied volatility rank, >50 implied volatility criteria -- GPS. It announces on Thursday after market hours, but I won't have time to fiddle with it then, so I'm shooting for a fill here. I looked at both an iron condor and a short strangle, but those didn't have enough juice in them to make them worthwhile given the price of the underlying. I'm also going farther out than usual for an earnings play, as I generally like to give straddles greater leeway to work themselves out with time (although I'm naturally hoping we get beaucoup volatility contraction post-earnings such that I can take it off fairly immediately). Metrics: Probability of Profit: 56% Max Profit: $208/contract Max Loss/Buying Power Effect: Undefined/~$350 Theta: 2.24/contract Delta: -3.3/contract Break Evens: 15.42/19.58 Notes: A short straddle is a short call and short put at the same strike ... . Unlike a strangle, I'll look to manage this at 25% max profit because the "profit zone" is somewhat narrower as compared to an iron condor or short strangle ... .
G
by NaughtyPines
2