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THE WEEK AHEAD: COST, GDXJ/GDX, XOP, SLV, EWZA late "Week Ahead" post after a short road trip ... . EARNINGS: There aren't many options liquid underlying volatility contraction plays on tap this week. COST (35/38/6.8% (October)-10.1% (November) announces on Thursday after market close, but the volatility metrics aren't the greatest for a contraction play with 30-day at 38, the October monthly at expiry-specific 37.8%, and the November monthly at 34.8%. My general cut-off to pull the trigger on something is a 30-day greater than 50%, so I'm likely to pass on this one. EXCHANGE-TRADED FUNDS WITH 30-DAY GREATER THAN 35% AND RANKED BY PERCENTAGE OF STOCK PRICE THE NOVEMBER AT-THE-MONEY SHORT STRADDLE IS PAYING: TQQQ (42/103/33.7%) GDXJ (23/58/18.3%) XOP (17/55/17.8%) GDX (24/49/15.0%) SLV (45/48/15.2%) EWZ (20/48/15.1%) XLE (27/44/14.0%) SMH (25/40/12.2%) QQQ (36/37/11.6%) IWM (33/35/11.0%) Pictured here is a GDXJ November 20th 45/65 short strangle with the short options camped out at around the 20 delta that's paying 2.95 at the mid price. Although it's a little early for the November cycle (58 days until expiry) if like to keep things in that 45 day wheelhouse, this is the best bang for your buck as a function of stock price on the board, followed by XOP, GDX, and XLV. BROAD MARKET: QQQ (36/37/11.6%) IWM (33/35/11.0%) SPY (23/29/9.0%) EFA (23/24/7.5%) I've been engaging in programmatic 45 days until expiry, 16-delta short put selling in broad market in the highest 30-day implied instrument on the board. Here, it would be QQQ. However, there are only an October 30th (37 days) or a November 20th (58 days) expiry available, where the 16 delta strikes are paying 3.27 (the October 30th 235) and 4.22 (the November 20th 226). I've already got an October 30th short put hanging out there, so may just wait until next week when an early November weekly becomes available. IRA DIVIDEND-GENERATORS WITH 30-DAY GREATER THAN 35% AND RANKED BY PERCENTAGE OF STOCK PRICE THE NOVEMBER AT-THE-MONEY SHORT STRADDLE IS PAYING: SLV (45/48/15.2%) EWZ (20/48/15.1%) KRE (26/44/14.5%)
AMEX:GDXJ
by NaughtyPines
2
THE WEEK AHEAD: GDXJ, XOP, KRE, EWZ, QQQEARNINGS ANNOUNCEMENT VOLATILITY CONTRACTION PLAYS: Currently, no options highly liquid underlyings announcing earnings next week with high rank/implied. EXCHANGE-TRADED FUNDS SCREENED FOR 30-DAY IMPLIED > 35%: GDXJ (16/54/12.0%)* XOP (16/51/12.1%) SLV (34/47/10.7%) EWZ (17/45/10.7%) GDX (18/43/10.2%) BROAD MARKET: QQQ (32/35/8.2%) IWM (27/32/7.3%) SPY (22/26/5.6%) EFA (16/21/4.6%) DIVIDEND-GENERATING EXCHANGE-TRADED FUNDS: EWZ (17/45/10.7%) SLV (34/47/10.7%)** KRE (24/45/10.4%) XLE (23/41/9.3%) EWA (26/27/6.7%) SPY (22/26/5.8%) IYR (19/26/5.6%) XLU (17/23/5.2%) EFA (16/21/4.6%) GLD (24/20/4.4%) TLT (9/16/3.5%) HYG (15/14/2.6%) EMB (14/22/2.5%) Pictured here is a two-rung short put ladder in KRE (Current Yield 3.70%) intended for a retirement account environment. It was paying 1.83 at the mid as of the Friday close, but it's bid 1.43/ask 2.18 in the off hours, so will have to price that out during the New York session. I've already got some EWZ on (See Post, below), but may consider adding some SLV for precious metal exposure in addition to my GLD due to its higher volatility and scalability (which I probably should have thought about before throwing a three lot GLD ladder out there) (See, GLD Post, below). I've also added XLE to the list due to its current yield of 6.81%. GENERAL THOUGHTS: With the U.S. general elections occurring on Tuesday, November 3rd, I'll be looking to lighten up margin account positions running into the October monthly expiry (now 33 days 'til expiry). I will consider just flattening out completely, and then reestablishing positions thereafter. If you recall the last general election in 2016, it was limit down in /ES during the Asian session, all of which evaporated by New York open, leaving minimal volatility to take advantage of in its wake. I could see playing /ES in the overnight to capitalize on a potential volatility contraction that may occur in /ES from the overnight to the New York session, but it will depend to a certain extent on how much volatility expands running into the election. I'll try to post a potential trade set-up, but I can say it's likely to take one of two forms: (a) an at-the-money long call vertical to take advantage of skew and with risk one to make one metrics; or (b) an out-of-the-money short put vertical -- both defined risk. I lean toward the credit side (short put vertical) due to having more room to be wrong, but will have to price things out in the moment to compare and contrast the two setups for buying power effect, profit potential, and probability of profit. In the IRA, I'm going to keep on grinding on things as long as I can find decent premium to sell without going totally crazy; I want to keep a decent amount of buying power free in the event that we do get a big volatility event that shouldn't be passed up. * -- The first number is the implied volatility rank (where 30-day implied is relative to where it's been over the past 52 weeks); the second, the 30-day implied volatility; and the third, the percentage of stock price the at-the-money short straddle is paying in the October monthly. ** -- Neither GLD nor SLV pay a dividend, but I have a GLD position on to give me some exposure to precious metals.
AMEX:KRE
by NaughtyPines
2
Crude Oil - Buying the DipsOil prices are coiling up for a move which will eventually head towards to the mid $60s for the following reasons: - Bankruptcies - DXY destruction - Demand bottoming - Chaos in the Middle East at some point Pit stops along the way are marked by the fib extension from the first impulsive move - 0.5 and 0.618 being the most significant. The simplest strategy is to assume the fib levels are to at first sell the resistance levels and then buy when it flips to support. Right now it looks like the 0.236 level is now support. Below that you have a possible floor at the macro fib level around $40 - any dips here will likely be bought up quick. Still long QM @ $42.85 Total Oil P/L: $1,930 All trades linked below.
NYMEX:CL1!Long
by ryan-snk
THE WEEK AHEAD: GPS; SLV, GDX/GDXJ, XOP, IWM/RUTEARNINGS: GPS (37/82/17.0%) is really the only earnings announcement that interests me from a volatility contraction perspective. Pictured here is a September 18th skinny short strangle, which was paying 2.03 as of Friday close. EXCHANGE-TRADED FUNDS SCREENED FOR IMPLIED >35% AND WHERE THE OCTOBER AT-THE-MONEY SHORT STRADDLE IS PAYING >10% OF STOCK PRICE: SLV (50/61/17.4%) GDX (22/47/14.1%) XLE (21/37/11.6%) GDXJ (19/55/16.7%) EWZ (18/45/13.2%) XOP (14/49/14.0%) Juice as a function of stock price resides in SLV (17.4%), followed by GDXJ (16.7%), GDX (14.1%), and XOP (14.0%). BROAD MARKET: QQQ (23/28/8.2%) IWM (23/29/8.4%) EFA (17/21/5.6%) SPY (16/22/5.8%) IWM/RUT is where the premium is, relatively speaking, followed by the QQQ's. DIVIDEND YIELDERS: XLU (18/22/6.8%) EWA (18/22/7.8%) EWZ (18/45/13.2%) IYR (17/22/6.9%) EFA (16/22/5.6%) SPY (16/22/5.8%) HYG (15/13/3.3%) TLT (14/16/4.6%) EMB (11/10/2.8%) Brazil ... again?!
G
by NaughtyPines
Crude Oil - Black GoldCommodities are rallying today as the Dollar index loses value and right on cue, oil has hit my target at $43 (the 50 week EMA) and could pullback soon. I've closed my positions for a $1,237.50 gain (entry/exit linked below) and am looking to buy dips moving forward. I believe oil is heading higher by the end of the year and the fib extensions should help map out buy/sell points and hint on the strength of the moves. That pink trend line also will likely come into play at some point. Goodluck.
NYMEX:CL1!Long
by ryan-snk
Crude Oil - Launch PadCrude Oil sold off today at first however, traders decisively bid the price back up above the 200 day EMA. Note: The light blue 50 EMA on this 4hr chart is equivalent to the 200 day EMA This bullish price action tells me that the 200 day EMA is now the launch pad for traders to take this to the next level up. Most likely that would be the 50 week EMA around $43.25 - Depending on the reaction to this level, I'll sell or hold. Could be a short squeeze coming. Further, the MACD is crossing right at the zero line which indicates bullish momentum.
NYMEX_MINI:QM1!Long
by ryan-snk
THE WEEK AHEAD: AMD, BA EARNINGS; GDXJ, XOP, SLV PREMIUM SELLINGEARNINGS: -- PROBABLY PLAYING: AMD (38/71/15.4%) announces on Tuesday after market close. BA (25/71/15.1%) announces Wednesday before market open. Pictured here is an AMD August 21st delta neutral 60/85 short strangle paying 2.93 as of Friday close. The BA August 21st 150/210 was paying 7.23 at the mid. Naturally, strikes may need adjustment running into earnings, depending on how prices move in the early part of the week. If of a defined risk bent, look to sell iron condors with break evens wide of the expected move* and that pay greater than one-third the width of the wings. Examples: AMD August 21st 57.5/62.5/80/85, paying 1.99 (a little more aggressive delta-wise than I would usually go, but you've got 5-wides to deal with on the call side, at least as of the writing of this post); BA August 21st 140/150/200/210, paying 3.30 (but prices showing wide in the off hours). -- WATCHING FOR POTENTIAL RAMP-UP IN IMPLIED: EBAY (40/46), Tuesday after market close. SBXUX (22/28), Tuesday after market close. QCOM (27/46), Wednesday after market close. PYPL (43/52), Wednesday after market close. FB (37/46), Wednesday after market close. AAPL (24/39), Thursday after market close. GOOG (36/38), Thursday after market close. XOP (27/43), Frida before market open. EXCHANGE-TRADED FUNDS ORDERED BY RANK AND SCREENED FOR 30-DAY IMPLIED >35%/AT-THE-MONEY SHORT STRADDLE (SEPTEMBER) PAYING >10% OF THE STOCK PRICE: SLV (43/54/14.3%) XLE (27/42/12.5%) GDXJ (21/56/16.2%) EWZ (21/48/13.4%) GDX (18/43/12.8%) XOP (14/54/15.8% GDXJ, XOP, and SLV appear to paying the most relative to stock price. BROAD MARKET ORDERED BY RANK AND SCREENED FOR AT-THE-MONEY SHORT STRADDLE (SEPTEMBER) PAYING >10% OF THE STOCK PRICE: IWM, SPY, QQQ, and EFA are all paying <10% of the stock price. IRA DIVIDEND-PAYERS SCREENED FOR 30-DAY IMPLIED >35%/AT-THE-MONEY SHORT STRADDLE (SEPTEMBER) PAYING >10% OF THE STOCK PRICE: EWZ (21/48/13.4%) * -- Expected move is generally 85% of what the short straddle price is paying. For example, the BA July 31st 175 short straddle was paying 13.15 as of Friday close. 85% of that is 11.18, so options are pricing in a +/- $11.18 move through Friday's expiry which would's BA's expected move between 162.58 and 184.94.
NASDAQ:AMD
by NaughtyPines
3
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%)
Editors' picks
NASDAQ:NFLX
by NaughtyPines
12
THE WEEK AHEAD: BBBY EARNINGS; XOP, XLE, EWW PREMIUM SELLINGEARNINGS: Next week's earnings announcements are light, with options liquid underlying to play for volatility contract even lighter. BBBY (52/119/18.8%*) announces on Wednesday after market close, so look to put on a play before the end of Wednesday's session. Pictured here is a July 17th (12 days) 11 short straddle, paying 2.03 as of Friday close, 18.8% of where the stock was trading at 10.81. Look to take profit at 25% max or otherwise manage the trade by rolling out to August if it doesn't work out fairly immediately. DAL (43/89/12.3%*) also announces this week on Thursday. A July setup isn't paying much, so I'd be inclined to go out to August to make it more compelling, where the 23/36 short strangle paid 1.83 as of Friday close. EXCHANGE-TRADED FUNDS ORDERED BY RANK/PERCENTILE AND SCREENED FOR >35% IMPLIED: EWW (37/37/15.0%**) EWZ (37/56/10.5%) GDXJ (34/53/14.6%) XLE (33/45/14.6%) GDX (28/39/12.7%) XOP (22/57/16.3%) USO (9/51/13.2%) The most bang for your buying power buck appears to lie in XOP, followed by EWW, XLE, and GDXJ. BROAD MARKET: IWM (41/36/10.0%) IWM is the only broad market exchange-traded fund where the background implied remains greater than 35. IRA DIVIDEND GENERATORS: EWZ (37/56/10.5%) ... and EWZ the only dividend generator with a 30-day greater than 35. * * * Broad market volatility has come in quite a bit here, but SPY 30-day implied at 27.2% isn't exactly a "low volatility environment" either. Nevertheless, it's not a bad thing to sit back, let powder dry out a little bit in preparation for the next volatility wave and/or more productive earnings announcements, particularly with underlyings like NFLX, MSFT, and IBM announcing next week, along with a number of financials: C (36/55), WFC (45/54), BAC (33/48), JPM (32/43), MS (30/45), and GS (27/41). * -- Percentage of stock price the July 17th short straddle was paying as of Friday close. ** -- Percentage of stock price the August 21st short straddle was paying as of Friday close.
NASDAQ:BBBY
by NaughtyPines
THE WEEK AHEAD: MU, FDX EARNINGS; XOP, IWM, EWZEARNINGS: MU (36/64/11.7%) announces earnings on Monday after the close. Pictured here is a 19 delta short strangle in the July expiry, paying 1.55. FDX (46/59/11.4%) announces Tuesday after the close, with the 20 delta July 17th 115/147 paying 4.56. EXCHANGE-TRADED FUNDS ORDERED BY RANK AND SCREENED FOR 30-DAY >35%: EWW (59/44/12.6%) EWZ (47/63/17.7%) XLE (45/52/16.0%) GDXJ (43/60/17.7%) SMH (37/42/12.0%) GDX (36/45/14.5%) XOP (32/70/20.2%) USO (13/67/16.7%) Would probably go out to August here (54 days) ... . Looked at through the lens of what the short straddle is paying as a function of share price, it looks like I should be selling premium in XOP (20.2%), followed by EWZ (17.7%) and/or GDXJ (17.7%). BROAD MARKET ORDERED BY RANK: IWM (57/45/12.7%) QQQ (38/32/<10%) EFA (37/29/<10%) SPY (37/34/<10%) Small caps continue to be where the juice is at. IRA DIVIDEND-GENERATORS IYR (53/40/11.7%) XLU (50/33/<10%) EWZ (47/63/17.7%) EWA (46/40/11.2%) EFA (37/29/<10%) SPY (37/34/<10%) HYG (35/20/<10%) EMB (20/18/<10%) TLT (20/19/<10%) EWZ offers both better better premium as a function of stock price than IYR at the moment, as well as slightly higher yield (3.66% for the former; 3.50% for the latter). Since I've already laddered out IYR, I may dip at the EWZ well with the 16 delta short put paying .70 in August at the 22 strike, .84 in September at the 21 ... .
NASDAQ:MU
by NaughtyPines