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XOP

THE WEEK AHEAD: EWZ, XOP, MU, IWMTrade of the Week (May Cycle): Pictured here is an EWZ (29/34) May 17th 37/45 short strangle: 1.14 credit, .57 at 50% max, break evens at 35.86/46.14, delta -1.46, theta 2.87. Obvious Alternatives: EWZ May 17th 41 short straddle, 3.91 credit, .98 at 25% max, break evens at 37.09/44.91, delta -4.6, theta 4.01. Notes: Pros: High implied, high implied relative to broad market (i.e., SPY 16/13), non-closely correlated with broad market (.4 3-month SPY correlation). Cons: Preference is for implied to be higher within 52-week range. Exchange-Traded Funds XOP (20/30): May 17th 31 short straddle, 2.67 credit, .67 at 25% max, break evens at 28.33/33.67, delta 1.89, theta 2.73. Obvious Alternatives: May 17th 29/33 short strangle,* 1.15 credit, .57 at 50% max, break evens at 27.85/34.15, delta 2.07, theta 2.29. Notes: Pros: High implied relative to broad market, non-closely correlated with broad market (.3 3-month SPY correlation). Cons: Preference is for implied to be higher within 52-week range. XBI (21/26): May 17th 84/97 short strangle,** 2.48 credit, 1.24 at 50% max, break evens at 81.52/99.48, delta -.26, theta 5.62. Obvious Alternatives: May 17th 79/84/97/102 iron condor, 1.65 credit, .83 at 50% max, break evens at 82.35/98.65, delta -3.15, theta 2.47. Notes: Pros: High implied relative to broad market. Cons: Preference is for implied to be higher within 52-week range. Single Name With Earnings in the Rear View Mirror MU (10/40): May 17th 37/47 short strangle, 1.36 credit, .68 at 50% max, break evens at 35.64/48.36, delta .86, theta 3.41. Notes: Pros: High implied relative to broad market, non-closely correlated (.42 3 month SPY correlation). Cons: Preference is for implied to be higher within its 52-week range. Other Passing Observations: Broad market volatility remains in low gear here with VIX finishing the week with a 13.71 print, although VXN is at 16.62, and RVX at 17.80, so "the frisk" is in small caps with the IWM (20/18) short strangle nearest 25 delta in the May cycle -- the 147/159 -- paying 3.02 at the door and 1.51 at 50% max and the 142/147/159/164 iron condor paying 1.76, .88 at 50% max. * -- I'm in a May 17th 28/33 short strangle. (See Post Below). ** -- I'm in the May 17th 80/85/98/103 iron condor. (See Post Below).
AMEX:EWZ
by NaughtyPines
Update USOIL: $61.50 first, then $52Commodities are typically the last asset to peak during a cycle. We typically interest rates peak first, a couple of months later that followed by equities and a couple of months after equities we see commodities peak. Commodities such as crude oil, are part of the contraction phase in the cycle, the higher the price rises it begins to acts as a tax on consumers and that begins the early recession phase. For that reason, I have marked this rally in crude as a wave A of a bigger corrective pattern.
OANDA:WTICOUSD
by UnknownUnicorn266486
THE WEEK AHEAD: HAND SIT ON PREMIUM SELLINGAlthough VIX finished the week above the low volatility environment zone (<15) at 16.48, not much is enticing here from a premium selling standpoint at first glance. Earnings announcements are now down to a trickle, with the next quarter's announcements coming into range in the May cycle, militating in favor of putting on earnings-related volatility contraction plays closer to announcement since implied will in all likelihood expand running into them. ASHR (50/29), GDXJ (44/27), GDX (35/24), TLT (36/10), XLB (33/19) round out the top five exchange-traded funds sorted by rank; EWZ (12/38), XOP (26/32), OIH (27/32), ASHR (50/29), and USO (14/28) when sorted by 30-day implied, all below the >50/35 metrics I like to see out of these to put plays on, although I will continue to sell a bit of XOP premium here, since it's 30-day implied is nearly twice that of SPY's at the moment: the May 17th 30 short straddle's paying 2.99 (.75 at 25% max), nearly 10% of the Friday close share price of 30.06. On the majors end of the stick: SPY (28/16), QQQ (23/20), DIA (22/17), and IWM (19/21) -- all at the low end of their 52-week volatility ranges.
AMEX:ASHR
by NaughtyPines
THE WEEK AHEAD: TLRY, MU, CAG EARNINGS; XOP, GDXJThree earnings announcements interest me this coming week from a volatility contraction standpoint: TLRY (--/79),* announcing on Monday after market close; MU (45/51) -- Wednesday after market close, and CAG (86/45), Thursday, before market open. CAG: Pictured here is a CAG April 18th 22/24/25 Jade Lizard, which was 1.03 at the mid as of Friday close, giving it a downside break even of 20.97 with no upside risk, since the credit received exceeds the risk of the short call aspect of the setup. It's a bullish assumption, theta positive setup with a net delta of 21.14 and a theta of 1.86. Since it's gotten totally hammered since last earnings and does pay a dividend (.85 annualized; 3.69% yield), I could also see just going the most straightforward route, which would be short put, with the at-the-money 23 in the April monthly paying 1.11 with a downside break even of 21.89. TLRY: The April18th 55/60/85/90 iron condor's paying 1.63 at the mid, but I'd be picky and hold out for one-third the width of the wings in credit or pass on partaking, since the markets in the underlying are wider than I'd like. For the young at heart, the 60/85 one standard deviation move break even short strangle's paying 4.11, but would plan on a touch of price discovery if you want in. MU: The April 18th 40 short straddle is paying 4.53 at the mid and is about as delta neutral as you can get (.78) with a theta of 6.7 and break evens of 35.47/44.53. For those who need more room to be wrong and/or delta balance without going inverted: the 35/44 short strangle is paying 1.43 with one standard deviation break evens on both sides (33.57/45.43). On the exchange-traded fund front, premium selling is somewhat thin here with GDXJ (34/26), GDX (31/23), TBT (23/20), OIH (21/28), and IYR (19/12) rounding out the type five sorted by rank; XOP (18/29), OIH (21/28), EWZ (5/28), USO (10/27), and GDXJ (34/26), if sorted by 30-day implied. I'm still short straddling XOP (See Post Below), but don't have anything on in gold (GDX, GDXJ), so may putz with something small and nondirectional there. However, neither the GDX nor GDXJ at-the-money short straddles appear to be paying the 10% I generally like to see out of those -- the GDXJ May 17th 32 is paying 2.80 versus a 32.33 share price; the GDX May 17th 22, 1.67 versus a 22.30 share price. * -- TLRY doesn't yet have a 52-week rank metric, since it hasn't been around that long yet.
NYSE:CAG
by NaughtyPines
THE WEEK AHEAD: VIX, SPY, BMY, XOP, TLT, GLD, TLT, GLD, FXEGenerally speaking, the worst thing to do in a fairly low volatility environment is to put premium selling plays on just to have plays on. My general approach to these volatility lulls is to look at them as an opportunity to work what broken trades you may have on at the moment (e.g., inverted short strangles) in an attempt to dry powder out for the next pulse of volatility upward. It can and will suck, because your theta pile is diminishing on a daily basis, and one of your basic goals over time is to keep that theta number up. Having a high number of occurrences is great, but having a high number of quality occurrences is better than having a high number of low quality occurrences put on in a volatility environment that is less than ideal, since part of your edge with these plays is the notion that implied volatility is statistically overstated over a large number of occurrences and that volatility is mean-reverting and has a tendency to contract from highs. Last week, VIX finished at 16.1. That's better than it was for a ton of last year, but in the vast arc of time, it's around the imaginary division line between what is considered a high volatility environment and what is considered low. In SPY, 30-day implied volatility is at 15.4%, in the 24th percentile of where it's been over the preceding 52-week period -- in other words, it's at the low end of its 52-week range* when I'd rather have the 30-day high and the percentile high. The other basic test I use for determining whether broad market premium is worth selling is to look at what a 25 delta 5-wide SPY iron condor is paying in the expiry nearest 45 days.** The April 18th (39 days until expiry) 260/265/282/287 is paying 1.75 as of Friday close, which is greater than one-third the width of the wings, which isn't horrible considering the fact that there's less than 45 days left in that setup. Nevertheless, if I'm going to stick to my ideal premium-selling metrics, I'm going to pass on that play because it could be and has been better and/or richer, and there's always the risk that it'll get caught in a volatility expansion. At the very least, if I do feel compelled to get into that setup, it's going to be for a smaller number of contracts than usual, so that I can keep more capital free to do higher quality plays should we get into a more favorable premium-selling environment in short order. In the single name area, there is some high premium to be had, but it comes with caveats. For example, BMY (100/44). The implied volatility percentile is where I'd want it, with the 30-day nearly so. The downside is that earnings is in 46, and I'd frankly rather sell premium right around earnings than put something on here, only to have price gyrate around in the mean time and to have volatility potentially expand further running up to the announcement, which is not what you want with these plays. As usual, though, many traders do violate their standard rules-of-thumb, and I am no exception. Here, I'm doing it with XOP (32/34). The basic reason is that the 30-day is and has been better than broad market volatility for a very long time and is currently more than twice that of SPY; if I'm going to trade kind of an "all weather" setup that I pretty much have on all the time, it's going to be in something that gives me a little more bang for my buck than broad market. That being said, we're kind of in between monthlies where I'd ideally want to put something on -- April's a bit short for duration, May a bit long for my tastes, so I'd probably wait a smidge longer for May to grind down to that 45-52 week until expiry area. Other Macro Themes: TLT (20-Year Average Maturity Treasuries): For a short bit of time at the beginning of the month, the underlying collapsed to a low of 118.64 off of near-122 highs, and I thought I was going to get out of my 120 put calendar at my take profit. (See Post Below). No dice ... yet. Toward the end of last week, it looked risk off, with price grinding back up to nearly where it was at the end of February. I shorted it repeatedly from that 122.50 area in 2018 and will dip into that setup again should we continue in this vein, but we're not quite there yet. GLD: A short from 130 looked possible ... until it didn't, collapsing off of mid-Feb highs back to 122. Back to waiting. Of course, I'll be pissed if it dribble drabbles around here forever when the upward momentum looked so promising there. FXE (The Euro Proxy): Mario Draghi says the Central Bank's staying "loose" ... for a while. With /6E/FXE breaking out of the box where it's been range-bound for weeks, I'll have to re-evaluate where the extremes lie with 1.185 in /6E being the previous sell area extreme; 1.125, the buy. We're in the bullish assumption/buy neighborhood, but if Mario's going to stay "loose" for the foreseeable future and Powell's going to stick to "data dependent" and leave the pace of further hikes "fuzzy," I'm not keen in taking a bullish assumption shot here yet, since Powell could get all "un-fuzzy" on me at the May or June meetings ... . /CL: Choppity, choppity chop between 55 and 58 since mid-Feb, finishing on Friday at 56.04. * -- For exchange-traded funds, I generally look for 30-day at greater than 35%, with the percentile above 50% over the preceding 52-week period. Single name: 30-day greater than 50% and above 70% over the preceding 52-week period. ** -- I've previously looked at what a 20-delta three wide is paying (it should pay at least one-third or a 1.00), but there has been at least one intervening study that shows going tighter with the shorts (25 delta) and wider with the long results in a return on capital that more closely emulates that of short strangles.
TVC:VIX
by NaughtyPines
4
THE WEEK AHEAD: NIO EARNINGS; XOP, EWZ PREMIUM SELLINGMy screeners aren't showing me a ton of things for either earnings-related volatility contraction plays and/or just Plain Jane premium selling, so I'm largely looking just to work what I have on, do any adjustments that are necessary, and wait for a higher volatility environment (VIX is at sub-15 here) to deploy capital back into premium selling. The Chinese "Tesla killer" NIO (82/136) announces in two days and with a background implied clocking in at 136, who can resist putting something on. Pictured here is a fairly delta neutral 11 Short Straddle in the April expiry that is paying a whopping 4.18 at the mid (1.04 at 25% max) with break evens that encompass most of the underlying's whole data set -- 6.82 to 15.18. Even skewed to the call side, the net delta is -2.59 with a theta metric of 4.08. Obvious alternative plays: April 18th 7/11/11/15 iron fly: 3.10 at the mid, max loss of .90 versus max profit of 3.10 (.78 at 25% max), delta -.97, theta 1.43. I would note the rarity of the substantially better than risk one to make one metrics of this setup. April 18th 7 short put, .72 at the mid with a downside break even of 6.28. On the exchange-traded fund front, the vast majority of underlyings are at the very low end of their 52-week ranges, with the highest implied underlyings in XOP (16/30) and EWZ (10/30), which again militates in favor of not putting on a ton of nondirectional premium selling stuff here. I did look at ASHR, which did stick out at 75/34, but the options chains in April, May, and July have wanky strikes (i.e., the April 28th 27.71 (WTF?) short straddle), and I don't like having to roll from "wanky" to an even Steven strike if I have to. If I'm going to play China, it's going to be in the more liquid FXI (16/21), which doesn't suffer from similar oddities that make trading it potentially harder than it has to be.
NYSE:NIO
by NaughtyPines
THE WEEK AHEAD: M EARNINGS, XOP, TSLA, FCX, X, TWTR, BIDUPictured here is the only earnings announcement-related volatility contraction play with the metrics I'm looking for: greater than 70% rank and greater than 50% 30-day (it was 68/55 as of Friday close). Setup Metrics: 3.40 credit, break evens at 20.60/27.40, -8.20 delta, 3.1 theta. Obvious alternatives would be the April 18th 21/27 short strangle paying 1.21 with break evens at 19.79/28.21, a delta of -4.5, and theta of 2.43 and -- for those with a defined risk bent -- the 19/22/26/29 iron condor in the same expiry, paying 1.23 with 20.77/27.23 break evens, a -2.64 delta, and a theta of 1.15. On the exchange-traded fund front, the highest volatility remains in petro, with OIH, XOP, and USO taking the top three spots for 30-day implied at 31, 30, and 29, respectively, followed by EWZ at 29, and GDXJ at 26. With the exception of GDXJ, however, all of these are in the lower one quarter of their 52-week range (GDXJ's in the 31st percentile). As with last week, I'll continue to sell premium in XOP, albeit smaller than usual, reserving buying power for a richer volatility environment. Single names with earnings in the rear view ranked by 30-day: TSLA (12/49), FCX (24/43), X (18/43), TWTR (8/38), and BIDU (24/35). I'm in a FCX slightly bullish short straddle at 14 as a kind of quasi-bullish copper play, and have gone with a "not a penny more" short put in X (See Posts Below). As alternative plays, the X April 18th 24 short straddle is paying 2.83 (.71 at 25% max) with the 21/27 short strangle paying .84 (.42 at 50% max) The TWTR April 18th 32 short straddle is paying 3.61 at the mid (.90 at 25% max) with the 28/35 short strangle paying 1.19 (.60 at 50% max) in the same expiry. Spreads in both TSLA and BIDU are unattractively wide.
NYSE:M
by NaughtyPines
XOP MAY 17TH 30 SHORT STRADDLE (CONT'D)This is a short straddle that started as a double diagonal. (See Post Below). I've been rolling the short straddle body out to generally at-the-money to take profit and to bring in additional credits. Although implied volatility (31%) is at the low end of its 52-week range, it is more than twice that of the broad market; SPY is at 14%. So far, I've collected 4.31/contract and will just continue to roll out as profitable opportunities present themselves or -- in the alternative, a side is approaching worthless and/or time is running out on the setup ... .
AMEX:XOP
by NaughtyPines
THE WEEK AHEAD: RIG, CRON, IQ, CZR EARNINGS; OIH/XOPEARNINGS: RIG (30/54) announces on Monday after market close; CRON (18/98), Tuesday before market open; and CZR (45/58) and IQ (22/64) on Thursday after market close. RIG Setups: Given its size (8.93/share as of Friday close), only a short straddle makes sense for a nondirectional play. Unfortunately, the March 9 only pays .96, making a 25% max take profit a marginal trade. The April 9 pays more (1.44) with a 25% max of .36, which doesn't exactly rock my socks. CRON Setups: Pictured here is a 16 delta short strangle in the April expiry which is preliminarily paying 1.87 at the mid (.93 at 50% max) with a delta of .55 and a theta of 3.68. The March 16 delta at the 17/28 was paying .93 (.46 at 50%) with a delta of .84 and a theta of 4.74. For those of a defined risk bent, I'd probably go out to April for more room to be wrong: the April 18th 14/17/30/33 brings in 1.10 preliminarily (.55 at 50%), delta 4.26, theta 1.05. CZR Setups: Like RIG, CZR is on the small side (9.15 as of Friday close). The March 9 short straddle is paying 1.12; the April, 1.52 (another non-sock rocker). IQ Setups: In spite of its sexy background volatility, single strikes aren't available in either the March or April monthlies, making this underlying particularly pesky to work a nondirectional like a short strangle or iron condor with "surgical precision." Consequently, I could see taking a bullish assumption shot either via short put -- the April 20 (30 delta) is paying 1.13 with a downside break even of 18.87 (a 13.4% discount over current price), or the April 25 short straddle that pays 6.38 with a 39 long delta metric and break evens of 18.62/31.38. A May 25 short straddle may be available next week post-February opex, which would present a flatter delta metric for the 25 short strad than the April setup. EXCHANGE-TRADED FUNDS The top five ranked by implied: UNG (51/57), OIH (22/31), XOP (17/30), EWZ (13/30), and USO (15/30). Although ranks are generally at the low end of their 52 week-ranges given the volatility spike we experienced in December, I'll continue to sell nondirectional premium (short straddles, generally) in my petro go-to, XOP, albeit using a smaller numbers of contracts than when background volatility was higher.
NASDAQ:CRON
by NaughtyPines
THE WEEK AHEAD: TEVA, BIDU, RIG, XOPBIDU (44/42), RIG (33/56), and TEVA (49/53) announce earnings this week, with TEVA looking for a March to April volatility contraction of about 15%, BIDU, approximately 7.7%, and RIG, 6.9%. Instead of looking to play these pre-announcement for a volatility contraction (the contraction percentages aren't that compelling), I'll look to potentially short put/acquire/cover instead,* particularly since all of these underlyings have been hammered of late and are at the low end of their 52-week ranges. Pictured here is a Plain Jane, TEVA 20-ish delta 16 short put in the April expiry; it's paying .51 with a break even of 15.49. The more aggressive 30 would be at the 17 strike and is currently paying .79 with a 16.21 break even. On margin, the 16 short ties up about 320 to put on, the 17, 340, with respective returns on capital of 16% and 23% at max. The break evens represent a 15% discount over current price for the 16 short put; an 11% discount for the 17. The BIDU April 18th 155 (25 delta) is paying a 4.55 credit with a break even of 150.45, a potential 14.7% return on capital at max and a 11.4% discount over current price if assigned. As with TEVA, there is little point in holding shares if you don't have to, since it does not pay a divvy. If you end up in-the-money, roll as is and proceed to sell calls against to reduce cost basis. If you're not into tying up 31.00 in buying power on Baidu, there is RIG. Unfortunately, due to its size, you're going to have to go closer to the money to make it worthwhile in dollar and cents terms: the April 15th 8 short put (40 delta) is paying .57 with a break even of 7.43 -- a 35.6% potential return on capital at max and a 10.3% discount over current price if assigned. On the exchange-traded fund front, not much is hopping from a premium selling standpoint with VIX dropping into the 15's from its 2018 year-end highs of 36+, so I'll be looking to hand sit and keep powder dry for a higher volatility environment to get into nondirectional setups in broad market instruments. That being said, I will continue to sell premium in XOP, where the 30-day implied is over twice that of the broader market (34.1% versus SPY 15%). * -- The natural alternative should you not be interested in acquiring shares would be to roll the short put out in time "as is" if it hasn't worked out and then proceed to cover with a short call. The last two dividends were a paltry .07, so I could see not wanting to tie up buying power to be in the shares unless you absolutely have to.
NYSE:TEVA
by NaughtyPines
THE WEEK AHEAD: TWTR, TSLA, X, FCX, NFLX, XOPEARNINGS: The only underlying that interests me for an earnings announcement-related volatility contraction play this coming week is TWTR (62/67). Preliminary Setups: March 15th 28/38 Short Strangle (Pictured): 1.73 credit (.87 at 50% max), break evens at 26.27/39.73, -8.98 delta, 4.78 theta. March 15th 25/28/38/41 Iron Condor: 1.01 credit (.50 at 50% max), break evens at 26.99/39.01, -1.45 delta, 1.70 theta. March 15th 33 Short Straddle: 5.24 credit (1.31 at 25% max), break evens at 27.76/38.24, -10.32 delta, 8.27 theta. March 15th 24/33/33/42 Iron Fly: 4.70 credit (1.17 at 25% max), break evens at 28.30/37.70, -3.87 delta, 3.70 theta. Notes: As you can see by the chart, it has a tendency to move somewhat big around earnings. Although it's small enough to short straddle, I would lean toward the short strangle or iron condor for a play, since it gives you greater adjustment flexibility intratrade than, for example, the iron fly, although you can always invert the short straddle if the move is overly large. NON-EARNINGS SINGLE NAME TSLA (20/58) X (23/44) FCX (20/42) NFLX (21/39) Notes: I'm not hugely keen on nondirectional premium selling in these given their rank metrics. From a price action standpoint, I could see re-upping with a bullish directional assumption play in FCX on weakness (i.e., upward call diagonal, short put, short straddle with a bullish delta metric), but will have to price something out during the New York session to see whether it makes sense. Out of the money short puts in March don't appear to be paying squat, but the April 11's (37 delta) are paying .60 with a 10.40 break even (a 9.6% discount over current price), which would make for a fairly decent "wheel" play ... . EXCHANGE-TRADED FUNDS/MAJORS Petro continues to grove on good background volatility, even though the rank metrics aren't there, with USO at 22/33, OIH at 24/31, and XOP at 14/30 (all at the low end of their 52-week ranges), with my go-to XOP still paying 2.44 at the mid for the March 15th 31 short straddle (.61 at 25% max). It's not great, but it's not yet "marginal." On the majors front, volatility has bled out of the market with QQQ at 21/20, IWM at 20/18, DIA at 20/17, and SPY at 30/16. A VIX at 16.14 doesn't exactly constitute a "come hither" look, so would hand sit on buying power for a richer premium selling environment.
NYSE:TWTR
by NaughtyPines
THE WEEK AHEAD: AMD, AAPL, BABA, FB, TSLA, X, AMZNWe've got a bevvy of earnings announcements on tap: AMD: Tuesday After Close AAPL: Tuesday After Close BABA: Wednesday Before Open FB: Wednesday After Close TSLA: Wednesday After Close X: Wednesday After Close AMZN: Thursday After Close Out of these, AMD (73/74), TSLA (70/73), and X (79/58) have the best metrics for volatility contraction plays. Preliminarily: AMD March 15th 18/26 Short Strangle, 69% Probability of Profit, 1.39 credit, break evens at 16.61/27.39, delta -13.69, theta 3.23, 50% max of .69. AMD Feb 15th 18/25 Short Strangle, 72% Probability of Profit, 1.01 credit, break evens at 16.99/26.01, delta -18.76, theta 5.75, 50% max of .50. AMD Feb 15th 22.5/23 Quasi-Short Straddle, 59% Probability of Profit, 3.27 credit, break evens at 19.23/26.27, delta .07, theta 8.26, 25% max of .82. AMD Feb 15th 16.5/22.5/23/29 Quasi-Iron Fly, 55% Probability of Profit, 2.97 credit, break evens at 19.53/25.97, delta 3.61, theta 5.32, 25% max of .74. Notes: I've shown both the 19 Day Short Strangle next to the 46 day'er in the March cycle just to show that you don't get a huge bang for your buck by going farther out in time when shooting for a 70% or so Probability of Profit with your short strangles. .38/$38 is nothing to frown at, but I like to do these as "quickee dirtees," taking advantage of any post-announcement volatility crush and then getting out and moving on, so would lean toward the shorter duration February cycle trade. I've also shown an almost short straddle and a quasi-iron fly for those who like to start out more delta neutral. TSLA Feb 15th 240/250/340/350 Iron Condor, 63% Probability of Profit, 3.25 credit, break evens at 246.75/343.25, delta -1.18, theta 10.86, 50% max of 1.62. Notes: I would shoot for a fill that is at least one-third the width of the wings or 3.33. Markets can be pesky wide in TSLA, and you don't want to start out underwater by virtue of the spread, so being patient, doing a little price discovery on the front end of things, and attempting to get filled above the mid is to your advantage ... . If the market won't come to you, pass on the play. X Feb 15th 21.5 Short Straddle, 56% Probability of Profit, 2.44 credit, break evens at 19.06/23.94, delta 4.02, theta 5.78, 25% max of .61. X Feb 15th 17.5/21.5/21.5/25.5 Iron Fly, 50% Probability of Profit, 2.10 credit, break evens at 19.40/23.60, delta -7.99, theta, 2.97, 25% max of .52. Notes: I looked at a short strangle with a 70% Probability of Profit metric, by the credit received didn't seem very compelling (<1.00). On the exchange-traded fund front, not much is hopping with the top five coming in under 50 in rank, under 35 in 30-day implied or both: IWM (59/21), DIA (52/18), XLV (48/18), SPY (47/17), and XHB (45/23), although implied remains fairly high in (where else?) oil, with OVX at 35.21, USO at 68/36, OIH at 44/33, and XOP at 36/32,
NASDAQ:AMD
by NaughtyPines
OPENING: XOP FEB/MARCH 26/31/31/36 DOUBLE DIAGONAL... for a 1.92 per contract credit. Metrics: Max Loss on Setup: $308 Max Profit on Setup: $192 Delta: .98 Theta: 2.50 Notes: Another double diagonal, this time in the routinely high implied volatility XOP (currently 35.5%), a la the EEM double diagonal I put on earlier in the trading session. (See Post Below). I've gone shorter duration in the back month than usual in order to pay a bit less for the longs and on the notion that I will, in all likelihood, be adjusting/recentering the long strangle aspect at some point anyhow (oil, after all, can move).
AMEX:XOP
by NaughtyPines
THE WEEK AHEAD: IBM, SBUX, USO, OIH, XOP(Pulling hair out). Ugh. A tough market temporarily for premium sellers. With VIX caving in dramatically off of its late December greater-than-35 highs, premium selling is the old gray mare that (temporarily) just ain't what it used to be. That being said, there are a couple of potential earnings plays to be had next week: IBM (68/31; Tuesday after market close) and SBUX (67/27; Thursday after market close). As you can see by the background implied volatility metrics, well, they ain't great, with IBM coming in at 31 and SBUX at 27. That being said, the February to March implied volatility contraction in IBM at the moment appears to be potentially from 32.7% to 26.6% (23% or so), and the SBUX from 25.7% to 23.5% (9.4%). From that standpoint, IBM appears to be the better volatility contraction play, since the market's pricing in a bigger contraction in the "Watson AI" company than in the omnipresent coffee purveyor. However, if you're going to play Watson, you're going to have to deal with goofy five-wides in the monthlies which, in itself, makes the play unappealing. Using the weeklies for a more surgical approach gets you fairly wide markets. Again, unappealing. (Scratches IBM off his list). SBUX suffers from the same problem, but with two-and-a-half wides. I remember playing SBUX before, but don't recall having this two-and-half wide nonsense in the monthlies. (Scratches SBUX off his list, too). On the exchange-traded fund front, some implied volatility juice appears to be concentrated in the petros -- USO, OIH, and XOP, where it pretty much is to a lesser or greater degree all the time. This is why I pretty much have some kind of trade on and running in XOP almost all the time. (See Post Below for my current XOP trade). This isn't necessarily the greatest place to start a relationship with this underlying (the implied volatility's at the low end of its 52-week range), but it's not paying horribly. Due to its relatively small size (31.60 at Friday close), I like to short straddle it -- the March 15th 32 short straddle is paying 2.92 at the mid with a 25% max take profit .73, which beats a poke in the eye with a sharp stick. In light of the broad market volatility crush, this is just one of those weeks where I don't anticipate putting much on unless something dramatically changes or I stumble across something directional to play. Until then, I'll just sit on a bunch of dry powder, and it deploy it when the time comes.
CBOE:VIX
by NaughtyPines