NaughtyPines

THE WEEK AHEAD: LB, ARMK, TGT EARNINGS; XOP, GDXJ, KRE, IWM/RUT

NYSE:LB   LIMITED BRANDS INC
EARNINGS-RELATED VOLATILITY CONTRACTION PLAYS:

LB (7/69/16.0%):* Announcing Wednesday after market close.
ARMK (11/56/13.1%): Announcing Tuesday before market open.
TGT (30/39/8.6%): Announcing Wednesday before market open.

Honorable Mentions:

LOW (23/39/8.6%): Announcing Wednesday before market open.
HD (17/31/6.7%): Announcing Tuesday before market open.
WMT (24/30/6.4%): Announcing Tuesday before market open.

Pictured here is an LB December 18th (34 days) 29/39 short strangle paying 1.99 at the mid price as of Friday close (.99 at 50% max) with 2 x expected move break evens.


EXCHANGE-TRADED FUNDS RANKED BY BANK FOR YOUR BUCK:

XOP (14/54/12.7%)
GDXJ (15/46/11.3%)
KRE (26/45/10.6%)
USO (6/50/10.3%)


BROAD MARKET RANKED BY BUCK BANG:

IWM (25/31/6.9%)
QQQ (23/29/6.3%)
SPY (16/23/4.9%)
EFA (17/20/4.6%)


* -- The first number is the implied volatility rank or percentile (i.e., where 30-day implied volatility is relative to where it's been over the past 52 weeks); the second, 30-day implied volatility ; and the third, the percentage the December at-the-money short straddle is paying as a function of stock price.

Comments

Thanks for sharing your idea
+1 Reply
Owwwo great 😊 your analysis report viewing I see try to again you can bring more and more amount thank you so much 😊
Reply
I'll be watching TGT this week thanks
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Hi NP - I appreciate you posting these Options trades as I am in the process of trying to learn (self taught online) some Options strategies.
Particularly Vertical spreads.

So after many videos, examples and thought, I went out on my own and tried a Bull Put Spread on NCLH.
My logic was, good company, beat down industry waiting to get back in gear, long period of consolidation... recent pop above resistance...

OK I see/learned now my idea seems sound, but timing of entry was not great...
I bought on the pop so got a poor premium which was better later that week after the pop faded.
Seeing its reaction to support last week I am still bullish in the trade.

The Red and Green (dotted) lines are the 2 puts (S - Red, B - Green). These extend out to the Dec option expiration on the 18th.
Blue and white lines are a small channel offering additional support above my Trade.
The yellow is the support from recent top, was tested with a break last week.

I took a single contract for this 'learning trade', which cost me $200 and had a credit of $55 if price above $17.5 by Dec 18. (27.5% return if it works!)

You seemed willing to assist disciples so I was hoping you might offer any feedback on my 1st Bull Put Spread trade.
Anyway just writing it down (to you) helped me work through it in my mind. Still feel reasonably confident to let it ride.

I have got mixed advice about closing a BPS or leaving it right to expiry... any advice?

Thanks in advance... TBS.

Reply
thebullshark thebullshark
@thebullshark, Just to clarify...

I took a single contract for this 'learning trade', which had a credit of $55.
If price remains above $17.5 by Dec 18, I keep the credit. (27.5% return if it works!)

If the price fell all the way to below $15 (protection) it will cost me cost me $200 max.
From what I learned however, most traders would close immediately if the $17.5 line gets touched.
As that is where the real losses would start to add up.
Reply
Pholesolus thebullshark
@thebullshark, yeah you definitely got a poor price, one of the things you can do with spreads like this is to average into prices over time thus reducing your single lynchpin loss price - I think from a fundamental and technical perspective the trade is solid but I don't think you gave enough room - buying a 30% pop is not an easy way to earn money. overall tho for a first trade its a 9/10 on the idea and a 4/10 on the execution
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Pholesolus Pholesolus
@Pholesolus, prices are just as important as the idea
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thebullshark Pholesolus
@Pholesolus, Yah Thanks for the input. I'm learning! Its amazing how much more you learn when you do it yourself, for real!
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NaughtyPines thebullshark
@thebullshark, One of the reasons people probably bail on touch/break of the short option strike price is that they're looking at potential assignment risk, particularly if there is very little time left until expiry. In practice, the risk of random assignment is quite small (it's on the order of about 7% overall), but the risk is greatest in the waning days of the contract (<10 DTE). So-called "random assignment" does occur, however, and if you don't want to be in the shares (or can't afford them), it effectively ends the play (you sell back the long option and sell out of the shares).
Reply
NaughtyPines Pholesolus
@Pholesolus, I would tend to agree with that. Either sell lower delta for the short option leg (most like the 20-25's) or wait for weakness in price, coupled with the high vol. This underlying is kind of tough, also, in the sense that it only has 2.5 wides, which makes being surgical from a delta standpoint a bit of bitch. Lol.
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