Although many of next week's earnings plays aren't up to my usual snuff due to lower implied volatility invading the entire market with VIX at sub-10 levels, some of these announcements might offer decent premium even though the metrics for a volatility contraction play aren't ideal (>70 implied volatility rank, >50 background implied volatility). Here, I'm looking for at least 70% probability of profit setups and -- for defined risk -- greater than one-third the width of the widest wing in credit. Look to put these plays on in the waning hours of the session immediately before the announcement and take profit for short strangles and iron condors at 50% of the credit received; 25% for short straddles/flies.
NFLX: Announces Monday after market close
July 28th 148/177.5 short strangle
Probability of Profit: 74%
Max Profit: $391 at the mid
Max Loss/Buying Power Effect: Undefined
Break Evens: 144.09/181.41 (> 1 SD, both sides)
July 28th 141/146/175/180 iron condor
Probability of Profit: 68%
Max Profit: $169 at the mid
Max Loss/Buying Power Effect: $331
Break Evens: 144.31/176.69 (> 1 SD put side, slightly less than 1 SD call)
IBM: Announces Tuesday After Market Close
July 28th 149/160 short strangle
Probability of Profit: 69%
Max Profit: $251 at the mid
Max Loss/Buying Power Effect: Undefined
Break Evens: 146.49/162.51 (at 1 SD, both sides)
July 28th 144/147/162.5/165 iron condor
Probability of Profit: 71%
Max Profit: $68 at the mid
Max Loss/Buying Power Effect: $232
Break Evens: 146.32/163.18 (at 1 SD, put side; > 1 SD call)
Notes: The iron condor is probably not worth it, given the fact that you're being paid less than 1/3rd the width of the strikes in credit for a 70% probability of profit setup.
CSX: Announces on Tuesday After Market Close
July 28th 53/57.5 short strangle
Probability of Profit: --
Max Profit: $96 at the mid
Max Loss/Buying Power Effect: Undefined
Break Evens: 52.04/58.46
Notes: For some reason, my platform isn't generating probability of profit metrics for this setup. The short strangle is likely to be around 70% with 1 SD break evens; given the fact that the short strangle is only paying $96, there is no way an iron condor with a >70% probability of profit would pay that, so it's not set out here. The defined risk alternative is to go iron fly: July 28th 51/55/55/59, Probability of Profit: 50%, Max Profit: $212 at the mid; Max Loss/Buying Power Effect: $188; Break Evens: 52.88/57.12 (expected move, both sides). In spite of the 50% probability of profit, not too shabby with reward/risk, since you're risking about one to make one.
EBAY: Announces Thursday After Market Close
July 28th 35/39 short strangle
Probability of Profit: 70%
Max Profit: $93 at the mid
Max Loss/Buying Power Effect: Undefined
Break Evens: 34.07/39.93 (at 1 SD, both sides)
Notes: As with the CSX play, there's no way a 70% probability of profit defined risk iron condor will pay 1/3rd the width of the widest wing if the short strangle's only paying .93. Again, the alternative is go iron fly: July 28th 33/37/37/41, Probability of Profit: 50%; $210 at the mid; Max Loss/Buying Power Effect: $190; Break Evens: 34.90/39.10 (expected move, both sides).
MSFT: Announces Thursday After Market Close
July 28th 70/75.5 short strangle
Probability of Profit: 70%
Max Profit: $118 at the mid
Max Loss/Buying Power Effect: Undefined
Break Evens: 68.82/76.68 (1 SD, both sides)
July 28th 67/70/75.5/78.5 iron condor
Probability of Profit: 66%
Max Profit: $86 at the mid
Max Loss/Buying Power Effect: $214
Break Evens: 69.14/76.36
Notes: The iron condor's payout is on the edge of being worthwhile; implied volatility would need to ramp up a little bit running into earnings.
NFLX: Announces Monday after market close
July 28th 148/177.5 short strangle
Probability of Profit: 74%
Max Profit: $391 at the mid
Max Loss/Buying Power Effect: Undefined
Break Evens: 144.09/181.41 (> 1 SD, both sides)
July 28th 141/146/175/180 iron condor
Probability of Profit: 68%
Max Profit: $169 at the mid
Max Loss/Buying Power Effect: $331
Break Evens: 144.31/176.69 (> 1 SD put side, slightly less than 1 SD call)
IBM: Announces Tuesday After Market Close
July 28th 149/160 short strangle
Probability of Profit: 69%
Max Profit: $251 at the mid
Max Loss/Buying Power Effect: Undefined
Break Evens: 146.49/162.51 (at 1 SD, both sides)
July 28th 144/147/162.5/165 iron condor
Probability of Profit: 71%
Max Profit: $68 at the mid
Max Loss/Buying Power Effect: $232
Break Evens: 146.32/163.18 (at 1 SD, put side; > 1 SD call)
Notes: The iron condor is probably not worth it, given the fact that you're being paid less than 1/3rd the width of the strikes in credit for a 70% probability of profit setup.
CSX: Announces on Tuesday After Market Close
July 28th 53/57.5 short strangle
Probability of Profit: --
Max Profit: $96 at the mid
Max Loss/Buying Power Effect: Undefined
Break Evens: 52.04/58.46
Notes: For some reason, my platform isn't generating probability of profit metrics for this setup. The short strangle is likely to be around 70% with 1 SD break evens; given the fact that the short strangle is only paying $96, there is no way an iron condor with a >70% probability of profit would pay that, so it's not set out here. The defined risk alternative is to go iron fly: July 28th 51/55/55/59, Probability of Profit: 50%, Max Profit: $212 at the mid; Max Loss/Buying Power Effect: $188; Break Evens: 52.88/57.12 (expected move, both sides). In spite of the 50% probability of profit, not too shabby with reward/risk, since you're risking about one to make one.
EBAY: Announces Thursday After Market Close
July 28th 35/39 short strangle
Probability of Profit: 70%
Max Profit: $93 at the mid
Max Loss/Buying Power Effect: Undefined
Break Evens: 34.07/39.93 (at 1 SD, both sides)
Notes: As with the CSX play, there's no way a 70% probability of profit defined risk iron condor will pay 1/3rd the width of the widest wing if the short strangle's only paying .93. Again, the alternative is go iron fly: July 28th 33/37/37/41, Probability of Profit: 50%; $210 at the mid; Max Loss/Buying Power Effect: $190; Break Evens: 34.90/39.10 (expected move, both sides).
MSFT: Announces Thursday After Market Close
July 28th 70/75.5 short strangle
Probability of Profit: 70%
Max Profit: $118 at the mid
Max Loss/Buying Power Effect: Undefined
Break Evens: 68.82/76.68 (1 SD, both sides)
July 28th 67/70/75.5/78.5 iron condor
Probability of Profit: 66%
Max Profit: $86 at the mid
Max Loss/Buying Power Effect: $214
Break Evens: 69.14/76.36
Notes: The iron condor's payout is on the edge of being worthwhile; implied volatility would need to ramp up a little bit running into earnings.