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Shortstrangle

EWZ NOV 16TH 34C/39P INVERTED SHORT STRANGLEJust updating an EWZ trade that I started out some time ago as an iron fly (See Post Below). Currently, it's morphed into an inverted November 16th 34C/39P -- a 5-wide, inverted short strangle that I've collected 6.87/contract in credits to date. Currently, this broken setup is valued at 7.16, so if I closed it out here for 7.16, I'd realize a small and very tolerable loss. The max I can earn on it is 1.87 (total credits received minus the width of the inversion -- five). With a current theta of 5.36, I'm going to hang in with it a few more days ... .
AMEX:EWZ
by NaughtyPines
OPENING: XOP SEPT 21ST 40/44 SHORT STRANGLE ... ... for a 1.31/contract credit. Probability of Profit: 62% Max Profit: 1.31 ($131)/contract Max Loss/Buying Power Effect: Undefined/6.68 ($668) Break Evens: 38.69/45.31 Delta: 3.65 Theta: 2.75 Notes: Giving myself more room to be wrong with a short strangle in the September cycle. Implied volatility remains so-so here at 24.7% (near the bottom of its 52-week range), so it might be more worthwhile to wait for higher implied. That being said, I'm basically working XOP as an "all weather core position."
AMEX:XOP
by NaughtyPines
THE WEEK AHEAD: HTZ, YELP EARNINGS; SLV/GLD/GDX LONGSHTZ puts the pedal to the metal on Monday after market close and is at the 52% mark of its 52-week range and has a 30-day implied of 75%. Due to its size, I'd probably only go short straddle: the Aug 17th 16 short straddle is paying 2.28 with a 25% take profit of .57. YELP shout outs its earnings on Wednesday (8/8) after market close (rank 66/30-day implied 61). Pictured here are two setups: an Aug 17th 38 short straddle and an Aug 17th 34/43 short strangle. The short straddle is paying 4.56 with a 25% take profit of 1.14; the short strangle, 1.49, with a 50% take profit of .75. On the exchange-traded fund side of things, not much is hopping with the only underlying ranked above 50% for the past 52 weeks being USO (rank 59; implied 26), with everything coming in at sub-35% for 30-day implied, which makes things temporarily unattractive in this area. (EWZ's at 32, XOP at 25, OIH at 25, and it kind of goes downhill from there). In the single name underlyings with earnings announcements in the rear view mirror, TSLA tops out the list with 51% 30-day, followed by TWTR (43), X (40), and RIG (40). In the major food group area: GLD, SLV, and GDX are all are fairly long-term horizontal support, so it may be worth taking a small bullish directional shot in one of those, although it's possible that's there more pain ahead for gold/silver/miners with another rate hike on tap in September. TLT: I'm looking for another short opportunity (probably on risk off) at horizontal resistance in the 122 to 122.50 area (we were at 119.22 on Friday, up .49 from Thursday's close). /CL's come quite a bit off of its nearly 73 high, but it's also somewhat off horizontal support at 64; I don't see much to do there directionally until it inflects with one of those prices (for that very reason, I could see something nondirectional here, if only XOP would throw all little more volatility my way, which is what I usually use to play oil nondirectionally). With the broad index funds (SPY, IWM, QQQ), all-time highs are again in view (287 in SPY, 170 IWM, 183 in QQQ); I could see a small directional short setup in one of those instruments, if only to add some short delta into your mix if you're getting too long (assuming you didn't add some on the last flirtation with all-time-highs ... ).
NYSE:YELP
by NaughtyPines
OPENING: SNAP AUG 17TH 12/12.5 SHORT STRANGLE... for a 2.08/contract credit. Although the underlying announces in 7, I'm taking advantage of the high rank/implied (85/88) in this small stock here since I can play it naked without tying up a ton of buying power or taking on huge notional risk. Since it's so "skinny," I'll look to treat it as a short straddle, shooting for 25% of max profit or about .52 ($52) per contract. Metrics: Max Loss/Buying Power Effect: Undefined/~2.30 ($230)/contract (on margin) Max Profit: 2.08 ($208)/contract Break Evens: 9.92/15.48 Delta: -10.88 Theta: 6.56
NYSE:SNAP
by NaughtyPines
TRADE IDEA: QQQ AUG 18TH 127/130/145/147 IRON CONDORThe Q's have the highest implied volatility rank among the four major index exchange traded funds. That being said, I generally look to bring in one-third the width of the widest wing with these with the short options set up at the 20 delta, and I'm not getting that here, so it's less than ideal ... . The metrics: Probability of Profit: 62% Max Profit: $69/contract Max Loss/Buying Power Effect: $231/contract Break Evens: 129.31/145.69 Theta: .82 Delta: -1.78 Notes: Look to manage at 50% max. For an undefined risk alternative, go with the 130/145 short strangle, which pays 1.86 at the mid and has a probability of profit of 68%, BE's at 128.14/146.86, theta of 3.84, and a delta of 1.89.
NASDAQ:QQQ
by NaughtyPines
TRADE IDEA: COST JULY 21ST 155/158/175/178 IRON CONDORAfter news of AMZN's acquisition of WFM, COST's implied volatility has popped here, with its implied volatility rank ramping up to the 67th percentile over the preceding 52-week period, and with background implied volatility at 21%, making a premium selling play potentially worthwhile. Metrics: Probability of Profit: 64% Max Profit: $93/contract Max Loss/Buying Power Effect: $207/contract Break Evens: 157.07/175.93 Theta: 1.96 Delta: -2.47 As an undefined risk alternative, the July 21st 150/175 short strangle is going for 2.35 at the mid with a probability of profit of 71%, BE's at 155.65/177.35, theta 8.85, delta -3.91. Notes: Because I could potentially see this snapping back to the upside, you may want to skew the setup to the call side, narrow the call side spread to reduce call side risk, or otherwise put on a limited upside risk play (e.g., July 21st 160/173/175 Jade Lizard, 1.95 credit at the mid, BE's at 158.05/174.95). With the Jade Lizard, upside risk is limited to .05 (the width of the call side spread (2.00) minus the credit received (1.95) ... .
NASDAQ:COST
by NaughtyPines
TWO EWY (S. KOREA ETF) TRADE IDEASI haven't traded this particular instrument before. For obvious reasons, now seems like a perfect time. The first of the two trades is a short strangle, with the shorts set up at the ~30 delta strike: JUNE 16TH 60/65 SHORT STRANGLE POP%: 59% Max Profit: $140/contract Max Loss: Undefined Break Evens: 58.60/65.82 Theta: 3.01 Delta: .78 The second's a defined risk trade using the same strikes for the short options as used in the short strangle: June 16th 57/60/65/68 Iron Condor POP%: 52% Max Profit: $93/contract Max Loss/Buying Power Effect: $209/contract Break Evens: 59.09/65.91 Theta: 1.19 Delta: -4.16 Notes: I would look to manage either of these at 50% max. I considered one additional setup: a Reverse Jade Lizard: June 16th 59/60/64, where the 59/60 is a short put vertical and the 64, a naked short call. This yields a setup with a 70% pop, a max profit of 1.14/contract, a break even at 65.14, and no downside risk (since the credit received for the short call is > the max loss of the short put vert).
AMEX:EWY
by NaughtyPines
X EARNINGS SHORT STRANGLE/IRON FLYX announces earnings tomorrow (Tuesday) after market close, and with its implied volatility rank and implied volatility metrics, it's ripe for a volatility contraction play. Here are two possible setups, which naturally might need to be tweaked this way or that depending on price movement intraday tomorrow. Feb 17th 29/38 Short Strangle Metrics Probability of Profit: 68% Max Profit: $130/contract Buying Power Effect/Max Loss: Broker Dependent/Undefined Break Evens: 27.70/39.30 Notes: (1) Here, as is my habit, I'm selling the 20 delta call and put. (2) I went out a little bit farther in time to the monthly, since things are generally more liquid there, so I would be more likely to get a fill at the mid without too much diddling around. (3) Look to manage at 50% max profit or about $65/contract. Feb 17th 25.5/33/33/41 Iron Fly Metrics: Probability of Profit: 50% Max Profit: $392/contract Max Loss/Buying Power Effect: $408/contract Break Evens: 29.08/36.92 Notes: (1) The first thing I did was check to see what a three-wide iron condor would pay with the short options at the 20 delta strikes. It was less than 1/3rd the width of the strikes, so I switched to putzing with a fly. (2) Look to manage this setup at 25% max profit (~$98/contract). (3) While the setup looks "sexier" from a max profit standpoint, you'll also notice that the profit zone is narrower than that of the short strangle. Nevertheless, is defined risk going in, so I know what my max loss is if the thing blows up in my face.
NYSE:X
by NaughtyPines
3
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.
NYSE:JNPR
by NaughtyPines
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
SOLD SRPT AUG 26TH 35 CALL... for a 2.85 ($285)/contract credit. This will complete an Aug 26th 10/35 short strangle worth 4.15 in credit ($415)/contract, which I'll shoot to take off at 50% max profit. Because I already had the 10 short put on, this doesn't cost me any additional buying power. This will also give me some protection to the short side, since I think that this is more likely to implode than explode. Naturally, I hope to be out before any of that "splosion" occurs.
NASDAQ:SRPT
by NaughtyPines
9
NEXT WEEK EARNINGS PLAY POSSIBLES: YELP, KORS, NVDACurrently, there are three earnings announcements next week that meet my >70% implied volatility rank, >50% implied volatility standards: YELP, KORS, and NVDA and that offer up at least 1.00 ($100)/contract in credit for my troubles. Preliminarily: YELP Aug 19th 26.5/38 short strangle goes for 1.09 ($109)/contract at the mid (Tuesday after market close). KORS Aug 19th 44/56.5 short strangle goes for 1.15 ($115)/contract at the mid (Wednesday before market open). NVDA Aug 19th 50.5/60.5 short strangles for for 1.11 ($111)/contract at the mid (Thursday after market close).
NYSE:YELP
by NaughtyPines