EARNINGS
BIDU (97/55) announces earnings on Monday after market close, so look to put on a play in the waning hours of the New York session ... .
Pictured here is a September 80/120 short strangle paying 1.65 as of Friday close with delta/theta metrics of 1.57/8.07. You can naturally go defined risk, but you'll have to go in a smidge tighter with the shorts to collect one-third the width of the wings and being surgical with your strikes will be tough with 5-wides in that expiry. The September 20th 80/85/110/115 is paying 1.62 with delta/theta metrics of .26/3.20.
EXCHANGE-TRADED FUNDS
Precious metals keep on grinding in a high implied volatility state for yet another week, with the ideal rank/implied metrics remaining in GDXJ and nearly ideal ones in GDX:
GLD (80/16)
GDXJ (77/38)
SLV (77/25)
TLT (76/17)
GDX (72/33)
BROAD MARKET
EFA (53/17)
EEM (52/22)
IWM (36/22)
SPY (35/18)
QQQ (27/22)
Since I don't have anything on in EEM, I may consider putting on something longer-dated there. Using the delta neutral at-the-money short straddle test and looking for a setup that pays greater than 10% of the value of the underlying, it looks like I would have to go out to January where the 40 short straddle is paying 4.54 versus 39.54 the shares were trading at as of Friday close.
The January 17th 40 short straddle pays 4.54 with break evens at 35.46/44.54 and has delta/theta metrics of 1.96/1.13 and a 25 max of 1.13; the 16 delta 34/44 short strangle pays 1.05 (.52 at 50 max) with break evens of 32.05/45.05 and delta/theta metrics of -.15/.86. I'm fine with either, but there's something to be said for having room to adjust without going inverted with the short strangle.
VIX/VIX DERIVATIVES
VIX finished Friday at 18.47 with the /VX term structure still in backwardation from September to December, with the August contract settling next week.
I will continue to look to add at-the-money bearish assumption setups (short call verticals or long put verticals) in VIX in the front month (September) should we get additional pops to >20 and/or the same type of setup in UVXY and VXX using VIX levels as a guide. As of Friday close, the VIX September 18th 18/21 short call vertical was paying 1.10 at the mid with a break even of 19.10 versus 18.47 spot, but will probably wait for another pop to >20 to put on a similar setup.*
* -- Short call verticals: short in the money, long out of the money, paying one-third the width of the spread. Long put verticals: short out of the money, long in the money, paying less than one-third the width in debit. Short call verticals with the same strikes as a long put vertical have the same risk, so it's a matter of taste and/or the practicalities of having a bunch of different plays on in the same expiry as to which you use. For example, you can layer on same strike long put verticals over short call verticals without inadvertently "stepping on" the short call verticals you have on. As compared to VIX options -- which settle to cash, with UVXY and VXX, there's naturally some assignment risk, so I lean toward short call verticals in those particular instruments, since I'd rather be short shares if assigned.
BIDU (97/55) announces earnings on Monday after market close, so look to put on a play in the waning hours of the New York session ... .
Pictured here is a September 80/120 short strangle paying 1.65 as of Friday close with delta/theta metrics of 1.57/8.07. You can naturally go defined risk, but you'll have to go in a smidge tighter with the shorts to collect one-third the width of the wings and being surgical with your strikes will be tough with 5-wides in that expiry. The September 20th 80/85/110/115 is paying 1.62 with delta/theta metrics of .26/3.20.
EXCHANGE-TRADED FUNDS
Precious metals keep on grinding in a high implied volatility state for yet another week, with the ideal rank/implied metrics remaining in GDXJ and nearly ideal ones in GDX:
GLD (80/16)
GDXJ (77/38)
SLV (77/25)
TLT (76/17)
GDX (72/33)
BROAD MARKET
EFA (53/17)
EEM (52/22)
IWM (36/22)
SPY (35/18)
QQQ (27/22)
Since I don't have anything on in EEM, I may consider putting on something longer-dated there. Using the delta neutral at-the-money short straddle test and looking for a setup that pays greater than 10% of the value of the underlying, it looks like I would have to go out to January where the 40 short straddle is paying 4.54 versus 39.54 the shares were trading at as of Friday close.
The January 17th 40 short straddle pays 4.54 with break evens at 35.46/44.54 and has delta/theta metrics of 1.96/1.13 and a 25 max of 1.13; the 16 delta 34/44 short strangle pays 1.05 (.52 at 50 max) with break evens of 32.05/45.05 and delta/theta metrics of -.15/.86. I'm fine with either, but there's something to be said for having room to adjust without going inverted with the short strangle.
VIX/VIX DERIVATIVES
VIX finished Friday at 18.47 with the /VX term structure still in backwardation from September to December, with the August contract settling next week.
I will continue to look to add at-the-money bearish assumption setups (short call verticals or long put verticals) in VIX in the front month (September) should we get additional pops to >20 and/or the same type of setup in UVXY and VXX using VIX levels as a guide. As of Friday close, the VIX September 18th 18/21 short call vertical was paying 1.10 at the mid with a break even of 19.10 versus 18.47 spot, but will probably wait for another pop to >20 to put on a similar setup.*
* -- Short call verticals: short in the money, long out of the money, paying one-third the width of the spread. Long put verticals: short out of the money, long in the money, paying less than one-third the width in debit. Short call verticals with the same strikes as a long put vertical have the same risk, so it's a matter of taste and/or the practicalities of having a bunch of different plays on in the same expiry as to which you use. For example, you can layer on same strike long put verticals over short call verticals without inadvertently "stepping on" the short call verticals you have on. As compared to VIX options -- which settle to cash, with UVXY and VXX, there's naturally some assignment risk, so I lean toward short call verticals in those particular instruments, since I'd rather be short shares if assigned.