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XOP

Long live the XOP As of Dec. 26th USOIL has been on a reversal from its 2018 Q4 correction. On Jan 10th we broke through the resistance area of $51.25. The XOP as we all know is directly related to USOIL as it tracks an equal-weighted index of companies in the US oil & gas exploration & production space. The XOP's first resistance area that was broken through was $29.90. As XOP continued to rise we hit our next level resistance on 1/9/19. Over the last 2 days we've had trouble breaking through the $30.73 mark. According to my charting we have approached the bottom of our 7 day channel. Our 7 day forecast would predict a bounce upward into the $31.34 area. However in the last 2 days we have been creating a rising wedge. We can see a breakout to $31 and up or a breakdown back to $29.73 and below possibly even to $27.50. Friday Jan 11 Pre Market will tell us a lot about where we go from here. If XOP has a breakout and move up look for: Price Tgt 1 - $31.34 Price Tgt 2 - $32.70 If XOP hits resistance and falls look for: Price Tgt 1 - $29.73 Price Tgt 2 - $27.50 Natural Gas futures have fallen in February while Oil futures are up in February. This could create a lateral movement in the XOP however I'm fairly confident in a Bullish move for the weeks coming up.
AMEX:XOPLong
by thesandage
TRADE IDEA: XOP FEB/MARCH 25/30 UPWARD CALL DIAGONALMetrics: Max Loss/Buying Power Effect on Setup: $338/contract Max Profit on Setup: $162/contract Break Even: $28.38 versus $28.63 spot Debit Paid to Spread Width Ratio: 67.6% Delta: 39.2 Theta: .61 Notes: A bullish assumption shot at the low end of the range. Ordinarily, I like to go split month with these to give me more time to reduce cost basis, but there isn't an April expiry available yet, so going shorter duration (and therefore cheaper). Shooting for 50% max (.81/$81). I'll adjust the trade or cancel it in the a.m. pre-NY open if /CL price is substantially different from where it was at Friday close (48.31).
AMEX:XOPLong
by NaughtyPines
THE WEEK AHEAD: DAL, OIH/XOP, XLK, FCXAfter a short break for shortened trading weeks for the Christmas and New Year's holidays (how bout them holiday markets, huh?), I'm back to my regular routine. Here's what's on tap for the coming week ... . Earnings: I'm not seeing much on the earnings front for volatility contraction plays or premium plays in high implied volatility around earnings that are giving me that "come hither" look. I did look at DAL (65/40; earnings on Thursday), but it's got goofy two-and-a-halfs on the call side in the Feb expiry where I'd want to set up my tent, which could make call side trade management problematic. The very last type of headache I want to have with a trade is being forced to roll to a goofy strike or do something whacky because of strike unavailability. That being said, the February 15th 45 short put is paying 1.26 (30 delta) with a break even of 43.74 (8.5% discount over current price; divvy yield is 2.80%; 1.40 annualized) should that type of play strike your fancy. Exchange-Traded Funds Ordered by Implied Volatility Rank: GDX 73/33 USO 69/53 OIH 64/46 IYR 62/21 GDXJ 59/34 ... And Ordered by 30-Day Implied: UNG 38/54 USO 59/53 OIH 64/46 XOP 53/43 EWZ 27/35 As usual, petro (USO, OIH, XOP) is sticking out for volatility, which is kind of why I like to be in some kind of play with a premium selling component on a virtually constant basis. OIH and XOP continue to dribble along at the low end of their ranges, so my preference would be for bullish assumption setups there with no or limited upside risk (short puts, upward call diagonals, lizards) in the short to medium term. Having gotten out of an XOP upward call diagonal last week, I'll probably re-up with something in the February cycle and will post that trade here separately later in the week. Broad Market: QQQ: 59/30 IWM: 52/26 XLK: 48/30 SPY: 25/24 I've thrown XLK (technology) in here because of its close correlation with SPY (3-month of .86). In comparison, it's got slightly better volatility metrics, but is also one-fourth the price, so you can potentially proxy a broad market play without hanging as much buying power out there as you would with one of the majors. Trade of the Week: Pictured here is an FCX (62/57) upward call diagonal (bullish assumption) setup (with an overlay of copper futures). Although it's got earnings in 18, I'm just looking to get in on weakness and in a fairly high volatility environment. Moreover, I can get in fairly cheaply with a greater than 180 day back month, which will give me plenty of time to reduce cost basis in the diagonal. I went with the March 12 short call strike for the front month because the Feb 11 was "too close," and the Feb 12 was "too far away" (not enough collected for the short call). Metrics: Max Loss on Setup: $278; Max Profit on Setup: $122; Break Even: 10.78 versus 10.82 spot; Debit Paid to Spread Width Ratio: 69.5%.
NYSE:FCX
by NaughtyPines
THE WEEK AHEAD: TAX LOSS TIME; OIH/XOP/XLE, XRT, JNKWith but a few trading days left in 2018, it's time to consider taking tax losses in non-tax deferred accounts Personally, I flattened out of virtually everything on Friday, taking my lumps here particularly in my SPY, QQQ static, defined risk core positions in this fairly atypical year-end sell-off so that I can start off 2019 fairly clean, with smaller 2018 capital gains being the small consolation prize. Nevertheless, I still have a few crap piles left that I'll continue reducing cost basis on because I don't need the losses here and/or want to hold on to them for potential use next year, as well as a couple things that have "magically" worked out in the short- to medium term that I don't want to take gains on. Along with this broad market sell-off, however, comes potential opportunities, and I've been pouring over sector exchange-traded fund charts to see where the comparatively huge weaknesses lie for potential bullish assumption plays to start off the new year. Here are a couple of preliminary ideas, the brass tacks of which I'll get into after we ring in the new year. OIH/XOP/XLE Pick your poison. With oil crashing from a high of nearly $77/barrel at the beginning of October to finish Friday at $45.42, OIH, XOP, and XLE have followed suit, with OIH hitting lows not seen since the turn of the century; XOP and XLE aren't far behind. The play: I generally favor upward call diagonals, since you can fiddle with front to back month duration, and therefore maximum per trade exposure as compared to WOF*-fing or SPACK**-ing which subjects you to full notional risk, meaning that you'll have to mentally aside the buying power for those in order to take on a full one lot of shares (13.65 for OIH, 25.35 for XOP, and 56.11 for XLE) if you're going the WOF/SPACK route. Going longer dated with the back month requires a wider diagonal spread for an ideal setup (break even at or below market price of underlying; debit paid <75% of the spread width), so you can tailor the setup to your account size and/or risk appetite for the play; personally, I don't like to go with anything shorter than split month, since I like to have plenty of opportunity to reduce cost basis, and a one-month doesn't give you that, in my opinion. You'll naturally want to compare and contrast whether going call diagonal versus naked short put gives you buying power relief on margin, particularly for something like OIH, which was trading at 13.65 as of Friday close. The buying power effect of a 13 short put, for example, should be about 20% of notional, or 2.60. In a cash secured environment, you'll generally always get relief, since the short put would invoke 13.65 in notional/buying power, and a 90/30 upward call diagonal regardless of which expiry you use for the back month is unlikely to involve something greater than a 13-wide.*** XRT Fourth quarter earnings are generally the best quarter for retail, given the amount of cash people lay out for the holiday season. XRT is at long-term range lows, so I like a bullish assumption play to take advantage of this seasonality, with the front month in fourth quarter earnings season (Jan or Feb) and the back month in the next (March or April), since earnings are likely to contract off of their holiday peaks. As with the OIH/XOP/XLE bullish assumption play, you'll want to compare and contrast a short put over the relief you'd get over doing a 90/30 diagonal, and evaluate whether the possibility of taking on full notional risk is something you want to do given your risk appetite and/or account size. * -- "WOF" -- "Wheel of Fortune" put sold at the nearest the money strike. Run to expiration, you keep the premium if it expires worthless. If assigned, you proceed to sell calls against. ** -- "SPACK" -- "Short Put/Acquire/Cover" put sold generally at the 20-30 delta. Run to expiration, you keep the preem on worthless expiry. As with the WOF trade, you proceed to sell calls against, at or above your cost basis. *** -- The OIH April 18th 30 delta short call strike is at the 16, so a 13-wide would be a back month at a 3 strike. The lowest strike available in any expiry is a 10. JNK Yes, junk. With a 5.88% yield as of Friday close (1.98/share annually; $198/one lot versus TLT's 2.85%), junk is attractive from a yield perspective and could be a decent place to park cash here while the equities markets gyrate themselves out. Nevertheless, well, it's "junk," and really the only way I want to be in it is if I can fully hedge it while sucking in the divvies. This is how the setup would work. First, price out the next monthly at-the-money/out-of-the money short call vertical. For example, the March 34/36 short call vertical is paying .33 at the mid with a delta metric of -27.16; sell it. Because it's -27 delta, you'll want to buy 27 shares of JNK, resulting in a delta neutral, fully hedged position. Naturally, you'll have to manage it as you would any other position, rolling the short call vertical down or out in time to keep the full setup (stock + short call vert) in delta balance, with the downside being that if price moves up into your short call vertical, you'll have to in all likelihood widen it out to receive a credit for it on roll. Of course, 27 shares of JNK is probably not going to rock your world with divvies, but you can scale up over time or at the gate.
AMEX:SPY
by NaughtyPines
THE WEEK AHEAD: ADBE, COST EARNINGS; OIH, XOP, UNG DIRECTIONALSPersonally, I'm not doing a ton here beyond looking at cleaning up remaining December cycle setups and evaluating whether there are poo piles that should be looked at for the taking of tax loss in the margin account before year's end. Nevertheless, here's an outline of what's potentially playable in the coming week ... . ADBE (81/49) announces earnings on Thursday the 13th after market close. The 20-delta, January 18th 210/270 short strangle is paying a whopping 8.05/contract at the mid price, with the 25-delta January 18th 215/220/265/270 paying greater than one-third the width of the wings at a mid price of 2.13. Markets are showing quite wide at the moment, particularly in the defined risk setup, however, so it may prove unattractive at New York open from a liquidity standpoint. COST (76/31) also announces on Thursday after market close, but the background implied isn't generally what I'm looking for in an earnings-related volatility contraction play (generally, >50% is where I draw my "picky line"). On the exchange-traded fund front, petro leads the pack, with OIH rank/implied metrics coming in at 95/47, XOP at 79/44, and UNG at 72/86. With OPEC reaching an agreement late last week as to production cuts, I lean toward bullish assumption setups with time to work out/reduce cost basis, since it will take awhile for any cuts to appear in the pipeline. For example: an XOP June/Feb 25/34 upward call diagonal,* 6.55 debit/contract, break even at 31.55 versus 31.54 spot, max profit on setup of 2.45, 72.8% debit paid/spread width ratio. I'm already in a similar OIH bullish assumption setup, which is proving to be a "pulled the trigger" too soon type of thing. The back month in the OIH setup is in April, so I've still got time to reduce cost basis and for the trade to work out in some fashion, even though it's a bit of a rough sled here. With UNG in particular, I continue to look at a bearish assumption seasonality play, but markets on any given setup have been ugly wide, no matter what type of setup I seem to look at, and lack of liquidity is not your friend when doing an options setup. For broad market premium sellers: SPY (47/30), IWM (78/25), QQQ (69/27). * -- Buy the June 25, sell the February 34.
AMEX:SPY
by NaughtyPines
THE WEEK AHEAD: XOP, OIH, USO, XLE, UNG, EEMEarnings With >70 Rank/>50 Implied: No underlyings with highly liquid options with earnings announcements in the next week. With single names with earnings announcements in the rear view mirror, we're looking at earnings starting up again in the January cycle; I'd rather just play those closer to the announcement, rather than get caught up in a volatility expansion (e.g., CAT (84/40) with earnings in 53 vs. January opex 47 days until expiration). Exchange-Traded Funds With >50 Rank/>35 Implied XOP (81/44) OIH (81/43) USO (81/57) XLE (75/27) UNG (75/88) Notes: As you can see by the pictured setup, XOP is at the bottom of its 52-week range. With OPEC talks right around the corner (and likely jawboning to ensue), I'm slightly enamored with a bullish assumption setup here as compared to a nondirectional premium selling play, even though there's premium to be had (the Jan 18th 29/37 short strangle's paying 1.09 with a 70% probability of profit). Last week, I entered into a similar setup in OIH, (See Post Below), since it's gotten the sledge hammer to a greater degree than the rest of the petro-sensitive exchange traded funds. In any event, here are the metrics for the pictured play: Max Loss on Setup/Buying Power Effect: 4.02 debit/contract; Max Profit on Setup: 1.98/contract; Break Even on Setup: 33.02 vs. for a 6-wide, BE at 33.02 vs. 32.81 spot; Debit Paid/Spread Width Ratio: 67%. Look to roll the short call aspect out on significant loss of value (usually 50% max) and to take profit at 50% max (.99/$99 per contract). UNG has been pesky. I've looked at getting into a bearish assumption, seasonality-related short setup, but every time I look, the markets are stupid-wide, making it unattractive from an entry/exit perspective. Given its high rank/implied, however, it might be amenable to a bearishly skewed oppositional setup if you're willing to do a bit of price discovery and not settle for sub-mid price nonsense: the Jan 18th 27/46 short strangle is paying 2.92 at the mid with a net delta metric of =25.44 and break evens at 24.08 and 48.92, which covers a fairly huge swath of the 52-week range. If you're willing to spend a little more time in the trade, the April 18th 26/46 pays 4.91 at the mid, is =29.44 delta, and has break evens of 21.09 and 50.91, although I could see the reluctance to hang yourself out there undefined given the movement it's experienced over the last several weeks. Broad Market Exchange-Traded Funds Ranked By 30-Day Implied EEM 26 QQQ 24 IWM 20 SPY 18 EFA 18 Notes: The EEM Jan 18th 41 short straddle is paying 2.69; the ~30 delta, 39/43 short strangle pays 1.15. I've been working it via double diagonal with a short straddle body, just so I don't have to leg into and out of the long strangle aspect and to budget buying power devoted to the trade. (See Post Below).
AMEX:XOP
by NaughtyPines
2
OPENING: XOP 2 X DEC 21ST 35.5/39.5 SHORT CALL VERTICAL... for a .40/contract credit. Notes: This will finish my clean up of my XOP December cycle core position. (See Post Below for all the shenanigans). I've now got "unit balance" (same on put side as on call side), as well as a smaller number of units in total. My scratch point in the position for the December cycle is 5.15/contract, and the net delta of the position remains long running into opex. I'm profitable for the cycle in the underlying, but would like to milk out a little more, particularly since we may get some OPEC jawboning running in their December meeting (i.e., up), which will naturally benefit what remains of the position.
AMEX:XOP
by NaughtyPines
CLOSING: XOP DEC 21ST 28/31/35/40 IRON CONDOR... for a 1.12/contract debit (1.04 profit/contract). Notes: Further clean-up of my XOP core position in December. Now that I've taken off the 38/41 short call vertical and this iron condor, what remains is two short put verticals, one at 32/35, the other at 30/35. The 32/35 was left over from an iron condor I put on previously, the 30/35 from an iron fly, the call side of which I just closed. The 32/35's a three-wide; the 30/35, a five-wide (for a total of eight wide), so I'll look to sell a 2x4 wide in the December cycle to balance units running into expiry.
AMEX:XOP
by NaughtyPines
THE WEEK AHEAD: CRM, ANF, HPQ EARNINGS; XOP, NFLX, FCX, EEMEARNINGS WITH A RANK >70/IMPLIED >50: CRM (81/52): Announces on Tuesday after market close. The pictured defined risk setup pays a greater than a one-third of the wing width 1.89 with break evens between the expected and one standard deevy. ANF (68/86): Announces Thursday before market open. The Dec 21st 16 short straddle was paying 3.04 as of Friday close; the 25 delta 14/19 short strangle, 1.19. HPQ (85/41): Announces Thursday after market close. The Dec 21st 22/23 skinny short strangle is paying 1.45, which makes for a near nominal trade at 25% max (.36 profit). Look for background implied to ramp up to 50 plus; otherwise, pass on a play. EXCHANGE-TRADED FUNDS WITH A RANK >50/IMPLIED >35: USO (100/66): I tend to use this more as of oil volatility indicator than anything (although you can naturally look at that more directly with OVX). Here, it's saying "Sell premium in petro underlyings," which for me means XOP, XLE, or OIH. UNG (96/104): With UNG, I'm waiting for a seasonality short, but think putting on something in December is likely to be too early. January, however, is coming into range (currently 54 DTE). XOP (85/45): A smidge early to go out to January, but the 29/36 is paying a 1.52 in that expiry; the 32/33 "skinny," 3.58. SINGLE NAME WITH A RANK OF >70/IMPLIED >50/EARNINGS IN REAR VIEW: NFLX (78/59): It's still got juice ... . The Jan 18th 25-delta 220/225/300/305 iron condor's paying 2.13 at the mid (but the platform's showing wide markets, so that may not be as hot at NY open). FCX (71/55): The Jan 18th 11 short straddle is paying 1.73. BROAD MARKET: EEM (71/27) QQQ (66/28) IWM (62/24) SPY (39/21) EFA (13/20)
NYSE:CRM
by NaughtyPines
THE WEEK AHEAD: BBY, DE, GPS, LOW EARNINGS; UNG, XOP, NFLXIn spite of the shortened trading week due to the Thanksgiving holiday, there are balls to hit out there ... . Earnings: BBY (95/57) (announcing Tuesday before market open): The December 21st 57.5/75 short strangle shown here is paying 2.42 with break evens near the one standard deviation line. I tried pricing out a defined risk iron condor, but it looks like some strikes need to populate post-November opex in order for me to price a setup where I'd want to set up my tent (i.e., short strikes between the 20 and 30 deltas, longs 3-5 strikes out with the setup paying at least one-third the width of the wings). LOW (78/40) (announcing Tuesday before market open): As with the DE play, I'm able to price out a short strangle -- the 80% probability of profit December 21st 80/105 pays 1.35, but not an iron condor due to the population of strikes around where I'd like to set up. I'll just have to wait until NY open to price a defined risk setup. GPS (87/54) (announcing Tuesday after market close): To me, it's small enough to short straddle, with the December 21st 26 short straddle paying 3.17, but I could also see going with the 23/29 (paying 1.05) to give yourself a little more flexibility with defense if you're not a fan of defending the straddle via inversion (which is generally what you have to do with a short straddle where the move is greater than the expected). Alternatively, the December 21st 21/26/26/31 iron fly pays 2.71 with a buying power effect of 2.29, which are the metrics I'm looking for out of an iron fly (risk one to make one or better; credit received at least one-fourth the number of strikes between the longs). DE (81/48) (announcing Wednesday before market open): The December 21st 135/160 is paying 4.53 with near one standard deviation break evens; the 130/135/160/165 iron condor in the same expiry pays 1.75. Non-Earnings Single Name: NFLX (69/54) still has some juice in it post-earnings. The December 21st 240/245/325/330 is paying 1.56 -- not quite one-third the width, but you're only working with 33 days until expiry. Exchange-Traded Funds: The top symbols: SLV (100/24), UNG (100/97), EEM (63/27), OIH (77/41), and XOP (77/42). Unless you've been living under a rock, UNG, OIH, and XOP "friskiness" are understandable here, with oil prices taking a header from more than $75/bbl. to a low $20 below that since the beginning of October. Conversely, a fire got lit under natty's ass due to seasonally early weather-related pressure, shooting up from a less than a 3.50 print at the start of November to 4.93 mid-month. It's eased back to 4.39 since then, but yeesh ... . Were it not natural gas, I'd be inclined to sell premium in UNG given the rank/implied metrics, but I'm patiently waiting for my standard seasonality play -- a downward put diagonal with the front month in Jan, the back month mid year. Since we're only in November with plenty of winter in front of us, I'm satisfied with waiting on more potential upside before pulling the trigger on that setup. With XOP and related products, I've been selling nondirectional premium, although I could see potentially skewing things bullishly, adding some petro underlying long delta to existing setups, or just taking an outright bullish assumption shot (e.g., /CL short puts, XOP/OIH/XLE short puts, upward call diagonals, etc.), since oil has been totally crushed here. Majors: SPY (31/21); QQQ (53/25); IWM (54/23); DIA (37/19). Temporarily, it looks like QQQ is where the broad market premium is at, followed by IWM.
NYSE:BBY
by NaughtyPines
4
OPENING: XOP DEC 21ST 28/31/38/41 IRON CONDOR... for an .83/contract credit. Metrics: Max Profit: .83 ($83)/contract Max Loss/Buying Power Effect: 2.17 ($217)/contract Break Evens: 30.17/38.83 Delta: -.55 Theta: 1.73 Notes: An adjustment trade, primarily to add some additional extrinsic value to my XOP core position with XOP rank/implied still being high (100/42), as well as some short delta (it was shorter when I put it on, but price has continued to erode). I didn't quite collect one-third the width, primarily because I have to "squeeze" it in amongst the various spreads I already have on in the December expiry. As with my SPY core position, I'll look to mix and match profitable short put side with profitable short call side as we run into expiry and/or take the entirety of the position off in profit.
AMEX:XOP
by NaughtyPines
CLOSING: XOP 30/33/41/44 IRON CONDOR... for a .72/contract debit (.38 profit/contract; 34.5% max). Notes: As with my SPY core position, I'm mixing and matching profitable short put side with short call side of oppositional setups that I put on over time to take off some risk, book some profit, and (where possible) to get a bit of delta adjustment where I need it. (Here, I pick up a smidge of needed long delta by closing this out, since price of the underlying has moved to the call side of the pairing). This also has the side benefit of allowing me to recenter a setup in the underlying if I want to and/or frees up buying power to make an adjustment trade if necessary.
AMEX:XOP
by NaughtyPines
AMLP Offers Attractive Entry PointShares of the AMLP, which tracks a basket of MLP's (master limited partnerships), has been a stellar holding since mid-April both in terms of price and total return, thanks to its rich 7.8% dividend (at current prices). This advance has now pulled back to the 61.8% retracement , which is ideal for a continuation of the advance. I've been aggressively buying over the past few months and have done quite well it it, but now it's offering an opportunity for more buying. Mind you, this is not a trading vehicle. It's a long-term holding that you want to reinvest dividends (unless you're retired and looking for dividends as a payment). In addition, it's the perfect ETF to sell covered calls against, again, something I've been doing to increase the yield of my investment. On that point, try to stick with near-dated contracts because an unforeseen spike in oil could make this thing rally hard, thus eating away any premiums you collect selling calls against in. In short, I'm a buyer (and already a holder of a sizeable position), and I'll be adding today on this pullback to the 61.8% retracement. It's also showing oversold readings on the R.S.I., suggesting a bounce of sorts is due. I suggest you consider this ETF as a part of your own diversified portfolio. PS - I've added some upside targets to show the potential, the 127.2% and 161.8% extensions, the latter of which will take us to about $12.30, or almost 25% higher from here. Plus, that 7.8% dividend and selling covered calls against it will further boost your return! Oh, and don't get caught flat-footed on this selloff... this could be big! Happy trading (and investing)!
AMEX:AMLPLong
by EchoAlphaBravo