I've culled down all of next week's earnings announcements to options highly liquid underlyings where the 30-day is >50% and am left with two potential candidates for volatility contraction plays: BBBY (23/99/26.3%)* and MU (23/53/14.0%).
BBBY announces on Thursday before market open, so look to put on a play in the waning hours of Wednesdays session; MU, announces on Thursday after market close.
Pictured here is a delta neutral short strangle in the February cycle (49 days), which was paying 1.27 at the mid price as of Friday close with break evens wide of two times the expected move on the call side and slightly above the 2x on the put and delta/theta of -1.07/3.12. Naturally, you can see the call side skew here, with the similarly-delta'd short put 3.76 away from current price, but the call 7.24 away, so the underlying may merit a look at alternative plays that take advantage of this.
In contrast, the shorter duration January 15th 15/22.5 (14 days) was paying 1.02, with delta/theta metrics of .21/7.91, with the natural trade-off's being less room to be wrong, but a quicker resolution of the trade should you be right.
With MU, I'd look at a Plain Jane 2x expected move short strangle, which here would be the January 15th 68.5/85, paying 1.71 or the February 19th 62.5/90, paying 2.30.
EXCHANGE-TRADED FUNDS RANKED BY PERCENTAGE THE FEBRUARY 19TH AT-THE-MONEY SHORT STRADDLE PAYS AS A FUNCTION OF STOCK PRICE:
* -- The first number is the implied volatility rank or percentile (i.e., where 30-day implied is relative to where it's been over the last 52 weeks); the second, 30-day implied; and the third, what the February 19th at-the-money short straddle is paying as a function of stock price.
Well presented again! The Whisper on BBBY on the 7th of Jan is $0.31 on $2.77 Billion revenue, which is fairly strong, so the extra room to the upside may be needed, as the Strangle must maintain price between the Short options though expiry right? BBBY seems like one of the retailers who may not have exactly benefitted from COVID, but despite getting trashed early on, is actually still doing a fair trade. Wish I had held the stock from when I had it at $8.00.
One point of note, it is odd to me how TV is so often not in sync with other Earnings Consensus figures! Any idea why?
NaughtyPines
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@thebullshark, I also had it low in the trajectory, but took profit and moved on. I may also consider just a short put and keep it simple. Not sure why TV metrics are "off."
One point of note, it is odd to me how TV is so often not in sync with other Earnings Consensus figures! Any idea why?