THE WEEK AHEAD: MU, BBBY EARNINGS; XOP, GDXJ, SLV, EWZ, KRE, XLE
EARNINGS ANNOUNCEMENT VOLATILITY CONTRACTION PLAYS:
MU (27/57/10.8%)*, announces Tuesday after market close.
BBBY (32/105/20.2%), announcement Thursday before market open.
Pictured here is an MU October 16th 44/55 short strangle, paying 1.52 as of Friday's close (.76 at 50% max).
For those of a defined risk bent: the MU October 16th 40/45/52.5/57.5 iron condor was paying 1.74 at the mid as of Friday's close, (.87 at 50% max).
For BBBY, I'd probably go short straddle, skinny short strangle, or skinny iron condor with the October 16th 14/15 skinny short strangle paying 2.46 as of Friday's close (.62 at 25% max), and the October 16th 10/14/15/19 4-wide paying 2.02 (.51 at 25% max) with risk one to make one metrics.
OPTIONS LIQUID EXCHANGE-TRADED FUNDS SCREENED FOR >35% 30-DAY IMPLIED AND RANKED BY PERCENTAGE THE NOVEMBER (56 DAY'S) AT-THE-MONEY SHORT STRADDLE IS PAYING AS A FUNCTION OF STOCK PRICE:
XOP (16/54/17.8%)
GDX (22/54/17.0%)
SLV (39/48/14.4%)
EWZ (19/44/14.1%)
GDX (21/43/14.1%)
XLE (26/41/13.5%)
SMH (24/40/11.3%)
BROAD MARKET:
QQQ (33/34/10.9%)
IWM (31/34/10.6%)
SPY (21/26/8.3%)
EFA (22/24/7.1%)
DIVIDEND GENERATORS FOR THE IRA SCREENED FOR THOSE WHERE THE NOVEMBER AT-THE-MONEY SHORT STRADDLE IS PAYING >10% OF STOCK PRICE:
SLV (39/48/14.4%)**
EWZ (19/44/14.1%)
KRE (27/44/14.2%)
XLE (26/41/13.5%)
MUSINGS:
With the major binary event of the year approaching (U.S. general elections), I'll be attempting to resist the urge to trade in the margin account and will flatten that completely running into the October monthly expiry. The intent was to wind that account up prior to year end, so now is as good a time as any.
With retirement approaching, my medium to long-term focus will be turning to IRA trades in a cash secured environment, with the focus on exchange-traded-funds with dividends and the general go-to strategy being short put, acquisition, and covering, resorting to highly liquid single name only in the event that sector and broad market volatility totally dry up. I'll continue to grind on those broad market/exchange-traded fund trades through the election as long as volatility hangs in there, naturally keeping some powder dry in the event that a high volatility event presents itself. This basic approach has worked well over the years, and I see no particular reason to change it now, even though it has zero sexiness and can be slow going, particularly if you're not the patient type.
My current stock positions are in SPY (covered call), TLT (covered call), IYR (covered call), and EFA (covered call). In addition, I've got short puts or short put ladders deployed in QQQ, IWM, SPY, SLV, EWZ, KRE, XLE, GLD, and HYG.
Previously, I was hesitant to dump my stock positions or allow them to be called away due to their paying dividends, but may change my tune, particularly with SPY, where the dividend is a paltry 1.76% relative to what the 30-day 2 x expected move short put is paying currently. Naturally, what a given option will pay will depend on where the implied volatility is at the given moment, but here the 2 x expected move short put nearest 30 days is the October 26th 305, paying 2.60 or .86% ROC at max (10.32% annualized).
The basic question is whether it's generally worth it to hang out in shares when you don't have to, even if you're getting a little extra something something if you've covered.*** Short puts, after all, make money regardless of whether the stock goes up or sideways and can even make money if the market goes down, assuming that your break even isn't broken; stock only makes money if it goes up. Short puts can be rolled to reduce cost basis further; once you're in stock, you're married to the position.
I guess I'm trying to talk myself into allowing my shares to be called away ... . :-)
* -- The first metric is the implied volatility rank (i.e., where 30-day implied is relative to where it's been over the past 52 weeks); the second, 30-day implied volatility; and the third, the percentage the October at-the-money short straddle is paying as a function of stock price.
** -- Neither SLV nor GLD pay a dividend.
*** -- The 2 x expected move short call nearest 30 days is the October 26th 346, paying 1.56 or 18.72 annualized, which also far exceeds what you'll receive in SPY dividends on an annual basis (currently 5.681/share or $568.10 per year for a one lot).
MU (27/57/10.8%)*, announces Tuesday after market close.
BBBY (32/105/20.2%), announcement Thursday before market open.
Pictured here is an MU October 16th 44/55 short strangle, paying 1.52 as of Friday's close (.76 at 50% max).
For those of a defined risk bent: the MU October 16th 40/45/52.5/57.5 iron condor was paying 1.74 at the mid as of Friday's close, (.87 at 50% max).
For BBBY, I'd probably go short straddle, skinny short strangle, or skinny iron condor with the October 16th 14/15 skinny short strangle paying 2.46 as of Friday's close (.62 at 25% max), and the October 16th 10/14/15/19 4-wide paying 2.02 (.51 at 25% max) with risk one to make one metrics.
OPTIONS LIQUID EXCHANGE-TRADED FUNDS SCREENED FOR >35% 30-DAY IMPLIED AND RANKED BY PERCENTAGE THE NOVEMBER (56 DAY'S) AT-THE-MONEY SHORT STRADDLE IS PAYING AS A FUNCTION OF STOCK PRICE:
XOP (16/54/17.8%)
GDX (22/54/17.0%)
SLV (39/48/14.4%)
EWZ (19/44/14.1%)
GDX (21/43/14.1%)
XLE (26/41/13.5%)
SMH (24/40/11.3%)
BROAD MARKET:
QQQ (33/34/10.9%)
IWM (31/34/10.6%)
SPY (21/26/8.3%)
EFA (22/24/7.1%)
DIVIDEND GENERATORS FOR THE IRA SCREENED FOR THOSE WHERE THE NOVEMBER AT-THE-MONEY SHORT STRADDLE IS PAYING >10% OF STOCK PRICE:
SLV (39/48/14.4%)**
EWZ (19/44/14.1%)
KRE (27/44/14.2%)
XLE (26/41/13.5%)
MUSINGS:
With the major binary event of the year approaching (U.S. general elections), I'll be attempting to resist the urge to trade in the margin account and will flatten that completely running into the October monthly expiry. The intent was to wind that account up prior to year end, so now is as good a time as any.
With retirement approaching, my medium to long-term focus will be turning to IRA trades in a cash secured environment, with the focus on exchange-traded-funds with dividends and the general go-to strategy being short put, acquisition, and covering, resorting to highly liquid single name only in the event that sector and broad market volatility totally dry up. I'll continue to grind on those broad market/exchange-traded fund trades through the election as long as volatility hangs in there, naturally keeping some powder dry in the event that a high volatility event presents itself. This basic approach has worked well over the years, and I see no particular reason to change it now, even though it has zero sexiness and can be slow going, particularly if you're not the patient type.
My current stock positions are in SPY (covered call), TLT (covered call), IYR (covered call), and EFA (covered call). In addition, I've got short puts or short put ladders deployed in QQQ, IWM, SPY, SLV, EWZ, KRE, XLE, GLD, and HYG.
Previously, I was hesitant to dump my stock positions or allow them to be called away due to their paying dividends, but may change my tune, particularly with SPY, where the dividend is a paltry 1.76% relative to what the 30-day 2 x expected move short put is paying currently. Naturally, what a given option will pay will depend on where the implied volatility is at the given moment, but here the 2 x expected move short put nearest 30 days is the October 26th 305, paying 2.60 or .86% ROC at max (10.32% annualized).
The basic question is whether it's generally worth it to hang out in shares when you don't have to, even if you're getting a little extra something something if you've covered.*** Short puts, after all, make money regardless of whether the stock goes up or sideways and can even make money if the market goes down, assuming that your break even isn't broken; stock only makes money if it goes up. Short puts can be rolled to reduce cost basis further; once you're in stock, you're married to the position.
I guess I'm trying to talk myself into allowing my shares to be called away ... . :-)
* -- The first metric is the implied volatility rank (i.e., where 30-day implied is relative to where it's been over the past 52 weeks); the second, 30-day implied volatility; and the third, the percentage the October at-the-money short straddle is paying as a function of stock price.
** -- Neither SLV nor GLD pay a dividend.
*** -- The 2 x expected move short call nearest 30 days is the October 26th 346, paying 1.56 or 18.72 annualized, which also far exceeds what you'll receive in SPY dividends on an annual basis (currently 5.681/share or $568.10 per year for a one lot).