NaughtyPines

THE WEEK AHEAD: GDXJ, XOP, KRE, EWZ, QQQ

AMEX:KRE   SPDR SERIES TRUST
EARNINGS ANNOUNCEMENT VOLATILITY CONTRACTION PLAYS:

Currently, no options highly liquid underlyings announcing earnings next week with high rank/implied.


EXCHANGE-TRADED FUNDS SCREENED FOR 30-DAY IMPLIED > 35%:

GDXJ (16/54/12.0%)*
XOP (16/51/12.1%)
SLV (34/47/10.7%)
EWZ (17/45/10.7%)
GDX (18/43/10.2%)


BROAD MARKET:

QQQ (32/35/8.2%)
IWM (27/32/7.3%)
SPY (22/26/5.6%)
EFA (16/21/4.6%)


DIVIDEND-GENERATING EXCHANGE-TRADED FUNDS:

EWZ (17/45/10.7%)
SLV (34/47/10.7%)**
KRE (24/45/10.4%)
XLE (23/41/9.3%)
EWA (26/27/6.7%)
SPY (22/26/5.8%)
IYR (19/26/5.6%)
XLU (17/23/5.2%)
EFA (16/21/4.6%)
GLD (24/20/4.4%)
TLT (9/16/3.5%)
HYG (15/14/2.6%)
EMB (14/22/2.5%)

Pictured here is a two-rung short put ladder in KRE (Current Yield 3.70%) intended for a retirement account environment. It was paying 1.83 at the mid as of the Friday close, but it's bid 1.43/ask 2.18 in the off hours, so will have to price that out during the New York session. I've already got some EWZ on (See Post, below), but may consider adding some SLV for precious metal exposure in addition to my GLD due to its higher volatility and scalability (which I probably should have thought about before throwing a three lot GLD ladder out there) (See, GLD Post, below).

I've also added XLE to the list due to its current yield of 6.81%.


GENERAL THOUGHTS:

With the U.S. general elections occurring on Tuesday, November 3rd, I'll be looking to lighten up margin account positions running into the October monthly expiry (now 33 days 'til expiry). I will consider just flattening out completely, and then reestablishing positions thereafter. If you recall the last general election in 2016, it was limit down in /ES during the Asian session, all of which evaporated by New York open, leaving minimal volatility to take advantage of in its wake. I could see playing /ES in the overnight to capitalize on a potential volatility contraction that may occur in /ES from the overnight to the New York session, but it will depend to a certain extent on how much volatility expands running into the election.

I'll try to post a potential trade set-up, but I can say it's likely to take one of two forms: (a) an at-the-money long call vertical to take advantage of skew and with risk one to make one metrics; or (b) an out-of-the-money short put vertical -- both defined risk. I lean toward the credit side (short put vertical) due to having more room to be wrong, but will have to price things out in the moment to compare and contrast the two setups for buying power effect, profit potential, and probability of profit.

In the IRA, I'm going to keep on grinding on things as long as I can find decent premium to sell without going totally crazy; I want to keep a decent amount of buying power free in the event that we do get a big volatility event that shouldn't be passed up.


* -- The first number is the implied volatility rank (where 30-day implied is relative to where it's been over the past 52 weeks); the second, the 30-day implied volatility ; and the third, the percentage of stock price the at-the-money short straddle is paying in the October monthly.
** -- Neither GLD nor SLV pay a dividend, but I have a GLD position on to give me some exposure to precious metals.

Comments

Good luck
Reply
@Saeed966, Thanks. You, too!
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