XOP trade ideas
Neutral trade on XOPWith an IVR of 32, I Sold the 37/34 Strangle for $1.52.
Our break evens are at $38.52 and $32.48.
58% probability of profit
Bubbles may turn into a Gusher. Possible inverse head and shoulders pattern on the daily although the neckline shows weakness as the continuation of the downtrend is possible. The pattern is forming near a past demand region of 34-35 may break the downtrend since Sept 2016. RSI has been increasing since March with a dip below 34.50 bought on May 4th and 5th. Something to watch for a reversal. Took a position in GUSH the leveraged version of XOP at 29.20, with a stop loss at 28.01 below the prior days low for XOP of 34.83. If stop is triggered will wait for a re-entry above 36.22.
Economic reasons include Saudi and Russian talks to continue to cut production despite higher U.S. Output and Increased inventories. Will be looking for confirmation of a positive move from the EIA crude oil inventory report released on 5/24, a decrease in the inventory could mean higher prices for UKOIL.
XOP: THREE BULLISH ASSUMPTION PLAYS IN ADVANCE OF OPEC TALKSWith XOP hanging around horizontal support here and with OPEC output cut extension talks and jawboning on the near-term horizon, it only makes sense to talk about petro plays with a bullish assumption, particularly due to XOP implied volatility rank (in the 74th percentile over the past six months) with background implied volatility at 34. Here are three:
LADDERED SHORT PUTS/SHORT PUT VERTICALS
The most straightforward of the strategies with a neutral to bullish assumption.
Example:
June 16th 33 short put
July 21st 32 short put
.97 credit at the mid
These are currently setup at the 20 delta strike. Look to take profit at 50% max, either one at a time, or for the setup as a unit. Generally, no intratrade defense. Toward expiry, look to roll out for duration and credit on test.
A defined risk variation on the nakeds, laddered short put verticals:
Example:
June 16th 30/33 short put vert
July 21st 29/32 short put vert
.64 credit at the mid
As with the naked short puts, look to take profit at 50% max, either individually or for the setup as a unit. Generally, no intratrade defense. Toward expiry, look to roll out for duration and credit on test.
POOR MAN'S COVERED CALL
Example:
Sept 15th 90 delta 28 long call/June 30th 30 delta 37.5 short call
7.28 db at the mid
Here, you're looking to reduce cost basis in your back month, long-dated option over time by rolling your short call out for duration and credit. With these, look to take profit at 10-20% of what you put it on for, taking into account any credits you received for rolls. Intratrade, look to roll out the short call when it's lost 50% of its value.
LIZARDS
There are several variations, all of which involve receiving credit for the entire setup that exceeds the max loss that could be experienced by the short call side.
Example (Naked Short Put + Short Call Vert):
June 30th 34/37.5/38.5 Jade Lizard
1.10 credit at the mid
BE at 32.90 (below expected move)
Example (Short Put Vert + Short Call Vert):
June 30th 31/34.5/37/38
1.02 credit at the mid
BE at 33.48 (above expected move)
Max Loss/Buying Power Effect: 2.48
Look to take these off at 50% max. Intratrade defense can be done by rolling the untested side toward current price to the extent it's productive. Toward expiry, look to roll the tested side out for duration and credit and to sell an oppositional side against for a credit that exceeds what you paid to roll, although it's generally just a walkaway trade if price blows through your short call side, since the max loss that can be experienced by that side will be less than what you collected in credit up front (i.e., all the risk associated with these is on the put side).
THE WEEK AHEAD: HPQ, LOW, BBY, GME EARNINGS; XOP, EWZ (NON)EARNINGS
HPQ, LOW, BBY, and GME are all up for earnings announcements. Out of these, BBY and GME appear to be the best candidates for premium selling, given their implied volatility rank and background implied volatility metrics, although virtually every liquid underlying with an earnings announcement bears watching; implied volatility can pop at the last moment, making them ripe for a play.
BBY announces on 5/25 before market open, so look to put on a play on the 24th before session close.
Preliminary Setups:
June 2nd 51.5 short straddle; 4.18 at the mid with break evens wide of the expected move at 47.32/55.68.
June 2nd 44.5/51.5/51.5/58.5 iron fly: 3.69 at the mid with break evens at 47.31/54.69; 3.81 max loss/buying power effect.
June 2nd 47/56 20 delta short strangle: 1.17 at the mid; BE's at or wide of the 1 SD at 45.83/57.17.
June 2nd 46/48.5/54.5/57 30 delta iron condor: 1.03 at the mid; BE's wide of the expected move at 47.47/55.53; 1.47 max loss/buying power effect.
GME announces on 5/25 after market close, so look to put on a play on the 25th before session close.
Preliminary Setups:
June 2nd 24 short straddle: 2.21 at the mid with break evens wide of the expected move at 21.79/26.21.
June 2nd 21/24/24/27.5 iron fly: 1.88 at the mid with break evens wide of the expected move on the put side, slightly short of the expected on the call at 22.12/25.88; 1.62 max loss/buying power effect.
June 2nd 22/26.5 20 delta short strangle: .65 at the mid with break evens wide of the expected move at 21.35/27.15.
June 2nd 20/22.5/26/28.5 iron condor: .72 at the mid with break evens wide of the expected move at 21.78/26.72; 1.72 max loss/buying power effect.
Due to the credits received for the short strangle/iron condor, would probably short straddle or iron fly.
NON-EARNINGS
The two exchange-traded funds with the metrics I generally look for: XOP and EWZ. I already have a non directional, defined risk EWZ setup on (an iron condor), so could look to add. With XOP, I'm looking at directional stuff (laddered short puts, laddered short put verticals, Poor Man's, or a setup with no upside risk, the concern being that OPEC will extend output cuts, causing this to rip skyward).
OPTIONS TIP: TRADING WHILE ON THE ROADWith summer somewhat upon us and with my wife making various plans (she's basically the family "travel agent"/"arranger"), I'm looking to wind down "higher attention span" setups and get into lower key/lower maintenance setups here so that I'm not driving her nuts on the road. "Hey, I just need to pull off here for a few and look at a few trades ... " gets pretty annoying after a few times. Here are a few simple tips so that you can not only enjoy your summer vacation, but also stay somewhat engaged in the market:
1. Accept You're Gonna Miss Stuff. Not being able to keep a constant eye on the market means you're going to miss stuff. VIX can flare up, and you're simply not going to be able to get into trades at all or at less than ideal junctures. This can be especially aggravating when "that's the VIX pop you've been waiting for," but it happens, and you simply can't plan your vacations around the VIX or anything else in the market.
2. Plan Ahead. Being on a trip or on vacation is not an ideal trading situation (i.e., not at your computer, cup of Joe at the ready). If you want to continue to trade in some fashion or at least monitor what you do have on, plan ahead: know how to set up your cell phone as a mobile hot spot so that you can access your account with a laptop or tablet; look to strategically plan or take advantage of stops where wi-fi is available (without, of course, driving your traveling companions bonkers); or manage your trades when you have the time to devote in a hotel somewhere or during a "down day" when weather has gotten in the way of outdoor activities. Naturally, working with a platform that has a decent mobile app helps tons -- one less piece of gear to haul about.
Relatedly, don't get into setups right before you leave that may require immediate action (e.g., a 2 days 'til expiration earnings play); close/roll stuff out that may be expiring in the middle of your vacation; and take trades off that are in profit, even if it means that you're taking them off sooner than you would ordinarily do.
3. Look to Put on Trades that Require Less Attention. As noted above, covered calls and Poor Man's just simply require less eyeball time -- they're longer term plays where you're looking to reduce cost basis over large time frames. I look at them weekly, but generally don't need to make decisions regarding call rolling until "late in the game" in the life of the short call. Consider rolling out the short call to an expiry that is longer than you'd usually do (e.g., 90 days instead of 45), so that you're not all wound up paying attention to what the short call is doing for the next several weeks.
4. Set Up Take Profit Targets from the Get-Go. Most of the setups I put on have predefined profit targets -- 25% max for short straddles, iron flies; 50% max for iron condors, short strangles, and nakeds. My habit is to set these up after my original setup is filled and then to largely leave them alone. If you're not in the habit of doing this, start now. There's nothing worse than allowing a 50% max winner turn into a loser simply because you didn't set a take profit and didn't have time to watch the setup.
Everything Energy Is Down, XOPThe SPDR S&P Oil & Gas Exploration & Production Fund has been in a defined bearish trend for all of 2017. Due to this bearish movement, the 100 day moving average (DMA) is about to cross below the 150 DMA. This actual event has occurred 6 times in the history of the fund and has resulted in a minimal drop of 1.541%. It has a median drop of 6.918% and maximum drop of 25.563% over the following 22 trading days. Although I typically write on events that have occurred, this event is likely and greater benefit could be gained by making moves earlier.
When we take a look at other technical indicators, the relative strength index (RSI) is at 43.0611. RSI tends to determine trends, overbought and oversold levels as well as likelihood of price swings. I personally use anything above 75 as overbought and anything under 25 as oversold. The current reading declares the fund has been moving lower. The RSI has been trending lower since May 2016. Even though the RSI typically cycles between overbought and oversold levels, that has not necessarily been the case with this fund. Overall the RSI is failing to make newer highs which is another significant signal of downward movement. This overall downtrend should continue as long as the RSI stays below this trendline.
The true strength index (TSI) is currently -16.2542. The TSI determines overbought/oversold levels and/or current trend. I solely use this as an indicator of trend as overbought and oversold levels vary. The TSI is double smoothed in its calculation and is a great indicator of upward and downward movement. The current reading declares the fund is trending down. Similar to the RSI, it is been trending down and failing to make new highs since May 2016. However, one new high was achieved near the end of 2017, before falling back into the downtrend. This overall downtrend should continue as long as the TSI stays below this trendline.
The positive vortex indicator (VI) is at 0.8265 and the negative is at 1.0848. When the positive level is higher than 1 and higher than the negative indicator, the overall price action is moving upward. When the negative level is higher than 1 and higher than the positive indicator, the overall price action is moving downward. The current reading declares the fund slightly moving up recently, but should begin its downtrend again.
The stochastic oscillator K value is 22.6852 and D value is 16.1343. This is a cyclical oscillator that is highly accurate and can be used to identify overbought/oversold levels as well as pending reversals and short-term activity. I personally use anything above 80 as overbought and below 20 as oversold. When the K value is higher than the D value, the stock is trending up. When the D value is higher that the K value the stock is trending down. The current reading declares the fund has been flirting with oversold territory for at least two weeks. Most likely one of two things will occur. The fund will continue to slowly move down with up days causing the stochastic to stabilize and rise even though the fund continues its downward bias. The second possibility would have the fund rise up and out of the downtrend either temporarily or permanently.
Considering the moving average crossover, RSI, TSI, VI and stochastic levels, the overall direction appears to be pointing down. Based on historical movement compared to current levels and the current position, the stock could drop at least 4.7% over the next 32 trading days.
Jade Lizard on XOP, 72% probabilitySold the 36/37 Call credit spread and sold the 34 Put eliminating the risk to the upside. In total received $1.06.
72% probability of profit.
OPENING: XOP APRIL 21ST 33.5/JUNE 16TH 30 PUT DIAGONAL... for a .03 db.
At its outset, you short put is basically completely "financing" the cost of your long put (but for the $3 it cost to put the trade on). Your goal is to roll the short option forward for duration, collecting credits along the way and to exit the setup for a debit that is less than what you collected in credits (as you would do with any credit spread).
Unfortunately, the metrics of such a setup are indeterminable, although it does cost about $350 in BP to put on. A number of things can potentially happen during the life of the setup, and the credits received for any roll of the short put are unknown.
Basically, however, I'm going to work the short put as I would a naked, but with the benefits of the long option keeping the risk defined ... .
$XOP - Wait for support, previous range 32.25~37.25, Neutral nowDown trend since $42, Volume increasing, Positive Divergence. Support between 32 ~ 35 area.
Trend Following Back In Hello Traders,
I wrote a technical post on the Oil & Gas Exploration sector and how I was looking to add portfolio exposure once more to this sector.
Well for the past three days $XOP has been cradled at it's 200 Day Moving Average which falls within the 50% -61.8% pullback from the previous impulse wave higher to the 44.97 pivot.
Today we had a decent bounce on volume exceeding the 50 Day Average Volume. Thus so I entered an initial position into the sector and am now long the ETF.
RSI readings were favorable with RSI bouncing off of the lower deviation band (Bullish).
I usually place stop orders around 5% - 10% away from entry when I use the 200 Day Moving Average as an entry. Stop percentage distance from the 200 Day Moving Average depends on the level of volatility of the underlying asset.
Trade smart, and with a plan. =)
TRADE IDEA: XOP MARCH 17TH 36/40/40/44 IRON FLYLooking for petro to zombie about in here in the short term ... . Implied volatility rank isn't as high as I'd like it, but background vol is one of the higher ones out there for exchange traded funds.
Metrics:
Max Profit: $242/contract
Max Loss: $158/contract
Break Evens: 37.58/42.42
Notes: Will look to manage at north of 25% max profit.
Energy E&P To Continue to Perform In 2017?Hi Traders,
I'll stick to the technical analysis on the S&P Energy Exploration & Production ETF.
I have been stalking this for a few weeks waiting patiently for a potential entry.
Now price is retracing into the 50% - 61.8% Fibonacci retracement of the most recent leg higher ($34.13 - $44.97).
Previous breakout volume was way above the 50 Day Moving Average.
As price begins to tag the 100 & 200 Moving Averages I will be entering long with an overall target being the -61.8% Extension marked by the C wave. Please take my target with a hint of salt as I hold on to positions and sometimes compound them on breaks higher, and occasionally trade around a core position.
I do expect price to stall around the previous highs of the A Wave - the -27% Extension.
Stops can either be placed at $36.00 or $33.00
RSI is returning to oversold territory with plenty of room to the upside also.
Trade smart and with a plan.
Cheers. =)
Another oil etf busting $XOPThis track is on repeat. We are seeing oil stock prices breaking out of consolidation. The time is nigh.
XOP weekly - bullish - 11/30/2016Looks like XOP is on its way to close above 2 major resistances. RSI and MACD all looks good. Likely next level is around $43 - $44.
WEEK OF 11/20: HIGH IV IN PETRO UNDERLYINGS; NOT MUCH ELSEWHEREAfter having gone through my usual routine of screening for high implied volatility rank/high implied volatility underlyings for plays this coming week, one thing stands out: the implied volatility is in petro, with stocks like CHK, SDRL, WFT, PBR and the like rounding out my top 10 IV list.* With OPEC talks approaching here, and "friskiness" in petro-based underlyings likely to ensue, I'm loathe to pile into more petro, particularly if it involves a bullish assumption. The "more likely than not" outcome is no meaningful OPEC agreement as to cuts, which means oil down, which means further long opportunities below somewhere. If the contrarian outcome comes to pass (i.e., "meaningful cuts"), well, then I've just plain ass missed an opportunity to add long positions here and will have to make do with the bullish assumption positions I've got on here.
That being said, the "Top 10" list isn't entirely bereft of possibilities, depending on your risk tolerance and aversion to roller coasters.
For example, GPRO may be worth a bullish assumption play here on the notion that Christmas sales of its drones will be "brisk," something we probably won't know unless GPRO discloses its unit sales before its Q4 earnings announcement next year. The nearest to the 20-delta strike short put, 45 DTE, however, is the Dec 30th 8.5, which would bring in .36 ($36)/contract at the mid -- not exactly something that gets me excited. Even assuming I wanted to go nondirectional (short strangle/straddle, iron condor/fly), I can't squeeze enough out of those setups premium wise to make it worthwhile.
VRX is, well, VRX. The Dec 30th 14.5 short put (currently the 19 delta) goes for .66 ($66) at the mid price. That isn't bad, but I have to put up with sitting on pins and needles for 5 weeks or more with that setup. The alternative would be to go with a defined risk setup (not keen on being caught undefined in a potential whipsaw). Even there, however, an iron condor won't pay out at least 1.00 in credit without forcing the wings in beyond the 1 SD (I prefer more room with volatile biotech), and I'm not sure that I would want to go with the narrower breakevens of a fly, in spite of the fact that the credit I'd receive at the door would be more than sufficient. (A Dec 30th 13/18/18/23 iron fly would bring in 2.78, for example).
Well, what about AMD? That's in the list ... . Like its semicon counterpart, NVDA, AMD's been on a rip and the place to have gotten in was lower for a bullish assumption play (scratches "short put" off his list). And nondirectional doesn't pay enough: the Dec 30th 8.5 short straddle would bring in a 1.44 credit at the mid (I like to get at least 2.00 out of those); the 7/10.5 short strangle, .40 at the mid. Defined risk (flies, condors) will bring in even less.
CLF? Same deal (can't get much out of the 45 DTE 20 delta short put; short straddle/strangle, iron condor/fly bring in too little premium).
Ugh.
Sometimes, these holiday weeks are best for hand sitting ... . Looks like this is going to be "par for the course."
* -- The top 10 implied volatility stocks (in descending order): CHK, WFT, VRX, CLF, AMD, GPRO, PBR, RIG, VALE, CX, UNG.
XOP -- BROADLY RANGEBOUND BETWEEN 32 AND 41With November OPEC talks designed ostensibly to hammer out proposed output cuts being the binary event for oil in the near-term, I'm looking to either (a) add to bullish positions in petro if those talks fail to result in meaningful cuts (I'm skeptical); or (b) hang on to my current bullish petro plays for the ride higher if those talks actually result in something. That "something" could run the gambit from a freeze at current levels, to modest output cuts, to deep production cuts. Previously, most of these talks have resulted in failure, so my money's on nothing really meaningful occurring that puts a major dent in the current glut. That being said, even a modest, non-glut relieving cut could signal to the market that there has been "some progress" over previous meetings, driving the price higher.
XOP has been broadly rangebound over the past several weeks between 32 and 41, so I'm looking to add to bullish positions via naked short puts or short put verticals at the 32 strike or below. Currently, XOP Dec 16th 32 short puts will bring in .50 ($50)/contract at the mid price; naturally, if price retraces somewhat on poor OPEC output cut talk, those strikes will increase in value, so patience is everything ... . If price drives higher, I'll just hang onto the long petro positions I have on now and wait for a better opportunity to add to or reestablish bullish oil positions.
Think this getting close to toppingCalled for a rebound in August, but this is looking very toppy to me here. Neg divergence on multiple time frames. $DRIP $GUSH
TRADE IDEA: XOP OCT 21ST 30/35/35/40 IRON FLYMostly hand-sitting here, but figured I'd take advantage of the increased volatility in the petro sector by selling a bit of premium in XOP, since its IV has popped here.
Metrics:
Probability of Profit: 52%
Max Profit: 2.46 ($256)/contract
Max Loss: 2.54 ($254)/contract
Break Evens: 37.46/32.54
Notes: I'll look to take this off at 25% max profit ... .
