Trade of the Week (May Cycle):
Pictured here is an EWZ (29/34) May 17th 37/45 short strangle: 1.14 credit, .57 at 50% max, break evens at 35.86/46.14, delta -1.46, theta 2.87.
Obvious Alternatives: EWZ May 17th 41 short straddle, 3.91 credit, .98 at 25% max, break evens at 37.09/44.91, delta -4.6, theta 4.01.
Notes: Pros: High implied, high implied relative to broad market (i.e., SPY 16/13), non-closely correlated with broad market (.4 3-month SPY correlation). Cons: Preference is for implied to be higher within 52-week range.
Exchange-Traded Funds
XOP (20/30): May 17th 31 short straddle, 2.67 credit, .67 at 25% max, break evens at 28.33/33.67, delta 1.89, theta 2.73.
Obvious Alternatives: May 17th 29/33 short strangle,* 1.15 credit, .57 at 50% max, break evens at 27.85/34.15, delta 2.07, theta 2.29.
Notes: Pros: High implied relative to broad market, non-closely correlated with broad market (.3 3-month SPY correlation). Cons: Preference is for implied to be higher within 52-week range.
XBI (21/26): May 17th 84/97 short strangle,** 2.48 credit, 1.24 at 50% max, break evens at 81.52/99.48, delta -.26, theta 5.62.
Obvious Alternatives: May 17th 79/84/97/102 iron condor, 1.65 credit, .83 at 50% max, break evens at 82.35/98.65, delta -3.15, theta 2.47.
Notes: Pros: High implied relative to broad market. Cons: Preference is for implied to be higher within 52-week range.
Single Name With Earnings in the Rear View Mirror
MU (10/40): May 17th 37/47 short strangle, 1.36 credit, .68 at 50% max, break evens at 35.64/48.36, delta .86, theta 3.41.
Notes: Pros: High implied relative to broad market, non-closely correlated (.42 3 month SPY correlation). Cons: Preference is for implied to be higher within its 52-week range.
Other Passing Observations:
Broad market volatility remains in low gear here with VIX finishing the week with a 13.71 print, although VXN is at 16.62, and RVX at 17.80, so "the frisk" is in small caps with the IWM (20/18) short strangle nearest 25 delta in the May cycle -- the 147/159 -- paying 3.02 at the door and 1.51 at 50% max and the 142/147/159/164 iron condor paying 1.76, .88 at 50% max.
* -- I'm in a May 17th 28/33 short strangle. (See Post Below).
** -- I'm in the May 17th 80/85/98/103 iron condor. (See Post Below).
Pictured here is an EWZ (29/34) May 17th 37/45 short strangle: 1.14 credit, .57 at 50% max, break evens at 35.86/46.14, delta -1.46, theta 2.87.
Obvious Alternatives: EWZ May 17th 41 short straddle, 3.91 credit, .98 at 25% max, break evens at 37.09/44.91, delta -4.6, theta 4.01.
Notes: Pros: High implied, high implied relative to broad market (i.e., SPY 16/13), non-closely correlated with broad market (.4 3-month SPY correlation). Cons: Preference is for implied to be higher within 52-week range.
Exchange-Traded Funds
XOP (20/30): May 17th 31 short straddle, 2.67 credit, .67 at 25% max, break evens at 28.33/33.67, delta 1.89, theta 2.73.
Obvious Alternatives: May 17th 29/33 short strangle,* 1.15 credit, .57 at 50% max, break evens at 27.85/34.15, delta 2.07, theta 2.29.
Notes: Pros: High implied relative to broad market, non-closely correlated with broad market (.3 3-month SPY correlation). Cons: Preference is for implied to be higher within 52-week range.
XBI (21/26): May 17th 84/97 short strangle,** 2.48 credit, 1.24 at 50% max, break evens at 81.52/99.48, delta -.26, theta 5.62.
Obvious Alternatives: May 17th 79/84/97/102 iron condor, 1.65 credit, .83 at 50% max, break evens at 82.35/98.65, delta -3.15, theta 2.47.
Notes: Pros: High implied relative to broad market. Cons: Preference is for implied to be higher within 52-week range.
Single Name With Earnings in the Rear View Mirror
MU (10/40): May 17th 37/47 short strangle, 1.36 credit, .68 at 50% max, break evens at 35.64/48.36, delta .86, theta 3.41.
Notes: Pros: High implied relative to broad market, non-closely correlated (.42 3 month SPY correlation). Cons: Preference is for implied to be higher within its 52-week range.
Other Passing Observations:
Broad market volatility remains in low gear here with VIX finishing the week with a 13.71 print, although VXN is at 16.62, and RVX at 17.80, so "the frisk" is in small caps with the IWM (20/18) short strangle nearest 25 delta in the May cycle -- the 147/159 -- paying 3.02 at the door and 1.51 at 50% max and the 142/147/159/164 iron condor paying 1.76, .88 at 50% max.
* -- I'm in a May 17th 28/33 short strangle. (See Post Below).
** -- I'm in the May 17th 80/85/98/103 iron condor. (See Post Below).
