THE WEEK AHEAD: PLAY, ACB, PTON, CHWY, WORK, AEO, GDXJ, QQQ, EWZ
EARNINGS:
Some decent earnings on tap in terms of options liquidity and implied volatility metrics this coming week. Here they are, ranked by how much the at-the-money short straddle is paying as a function of stock price:
PLAY (33/136/35.5%):* Thursday after market close.
ACB (30/205/32.5%): Wednesday (time not specified).
PTON (66/125/32.4%): Thursday after market close.
CHWY (19/112/25.7%): Thursday after market close.
WORK (51/104/25.1%): Tuesday after market close.
AEO (36/108/22.6%): Wednesday before market open.
ORCL (42/47/10.8): Wednesday (time not specified).
Pictured here is an expected move short put in PLAY with a break even at 13.70, 9.5% ROC as a function of notional risk, 88.9% ROC annualized; 4.8% ROC at 50% max/44.5% annualized at 50% max. Look to take profit at 50% max or cover if assigned. Basically, another COVID-19 recovery play (along with airlines, cruise lines, and restaurant chains).
With ACB and AEO being under $20/share, my basic approach would be either short straddle or iron fly, with the latter set up to generate risk one to make one metrics.
Examples:
ACB October 16th 8/9 "skinny short strangle," 2.70 at the mid price.
ACB October 16th 3/8/9/14 "skinny" iron fly, 2.42 credit, 2.58 max loss.
AEO October 16th 13 short straddle, 2.90 at the mid price.
AEO October 16th 8/13/13/18 iron fly, 2.48 credit, 2.52, max loss.
With the remainder, I would generally just sell the 20-25 deltas:
Examples:
PTON October 16th 65/135 short strangle, 8.43 credit at the mid price.
PTON October 16th 65/105/110 Jade Lizard, 6.01 at the mid price (no upside risk, downside break even at 58.99).**
PTON October 16th 2 x 55/2 x 60/125/135 "double double" iron condor, 3.43 at the mid.***
CHWY October 16th 49/90 short strangle, 5.08 at the mid.
CHWY October 16th 45/50/85/90 iron condor, markets showing wide in the off hours, but would look to get at least one-third the width of the wings in credit.
WORK October 16th 24/41 short strangle, 2.52 at the mid.
WORK October 16th 21/24/41/44 iron condor, 1.00 at the mid (but also showing wide in the off hours).
EXCHANGE-TRADED FUNDS RANKED BY PERCENTAGE OF STOCK PRICE THE OCTOBER AT-THE-MONEY SHORT STRADDLE IS PAYING:
TQQQ (49/117/29.0%)
GDXJ (22/59/14.7%)
XOP (16/56/14.3%)
SLV (44/55/14.0%)
GDX (23/47/12.4%)
EWZ (21/48/12.4%)
XLE (27/43/11.6%)
USO (7/44/11.4%)
SMH (26/41/10.3%)
I don't usually play TQQQ because it's leveraged, but thought I'd keep an eye on it if it does a mid-March lather, rinse, repeat.
BROAD MARKET:
QQQ (44/38/10.2%)
IWM (34/37/8.5%)
SPY (26/30/6.3%)
EFA (23/24/6.3%)
IRA DIVIDEND PAYERS:
EWZ (21/48/12.4%)
EWA (27/30/7.7%)
IYR (24/29/6.9%)
SPY (26/30/6.3%)
GLD (31/23/5.3%)
TLT (17/19/4.3%)
HYG (23/16/3.3%)
EMB (13/13/2.7%)
* -- The first number is the implied volatility rank; the second, 30-day implied volatility; and the third, the percentage the next monthly at-the-money short straddle is paying in credit as a function of stock price.
** -- Currently, PTON is showing some horrible skew on the call side, which can be accommodated via ratio, Jade Lizard, or a "double double" iron condor.
*** -- Double the number of contracts on the put side with the short put at half the delta of the short call and the short call vertical aspect at double the width of the put side. Hence the term "double double."
Some decent earnings on tap in terms of options liquidity and implied volatility metrics this coming week. Here they are, ranked by how much the at-the-money short straddle is paying as a function of stock price:
PLAY (33/136/35.5%):* Thursday after market close.
ACB (30/205/32.5%): Wednesday (time not specified).
PTON (66/125/32.4%): Thursday after market close.
CHWY (19/112/25.7%): Thursday after market close.
WORK (51/104/25.1%): Tuesday after market close.
AEO (36/108/22.6%): Wednesday before market open.
ORCL (42/47/10.8): Wednesday (time not specified).
Pictured here is an expected move short put in PLAY with a break even at 13.70, 9.5% ROC as a function of notional risk, 88.9% ROC annualized; 4.8% ROC at 50% max/44.5% annualized at 50% max. Look to take profit at 50% max or cover if assigned. Basically, another COVID-19 recovery play (along with airlines, cruise lines, and restaurant chains).
With ACB and AEO being under $20/share, my basic approach would be either short straddle or iron fly, with the latter set up to generate risk one to make one metrics.
Examples:
ACB October 16th 8/9 "skinny short strangle," 2.70 at the mid price.
ACB October 16th 3/8/9/14 "skinny" iron fly, 2.42 credit, 2.58 max loss.
AEO October 16th 13 short straddle, 2.90 at the mid price.
AEO October 16th 8/13/13/18 iron fly, 2.48 credit, 2.52, max loss.
With the remainder, I would generally just sell the 20-25 deltas:
Examples:
PTON October 16th 65/135 short strangle, 8.43 credit at the mid price.
PTON October 16th 65/105/110 Jade Lizard, 6.01 at the mid price (no upside risk, downside break even at 58.99).**
PTON October 16th 2 x 55/2 x 60/125/135 "double double" iron condor, 3.43 at the mid.***
CHWY October 16th 49/90 short strangle, 5.08 at the mid.
CHWY October 16th 45/50/85/90 iron condor, markets showing wide in the off hours, but would look to get at least one-third the width of the wings in credit.
WORK October 16th 24/41 short strangle, 2.52 at the mid.
WORK October 16th 21/24/41/44 iron condor, 1.00 at the mid (but also showing wide in the off hours).
EXCHANGE-TRADED FUNDS RANKED BY PERCENTAGE OF STOCK PRICE THE OCTOBER AT-THE-MONEY SHORT STRADDLE IS PAYING:
TQQQ (49/117/29.0%)
GDXJ (22/59/14.7%)
XOP (16/56/14.3%)
SLV (44/55/14.0%)
GDX (23/47/12.4%)
EWZ (21/48/12.4%)
XLE (27/43/11.6%)
USO (7/44/11.4%)
SMH (26/41/10.3%)
I don't usually play TQQQ because it's leveraged, but thought I'd keep an eye on it if it does a mid-March lather, rinse, repeat.
BROAD MARKET:
QQQ (44/38/10.2%)
IWM (34/37/8.5%)
SPY (26/30/6.3%)
EFA (23/24/6.3%)
IRA DIVIDEND PAYERS:
EWZ (21/48/12.4%)
EWA (27/30/7.7%)
IYR (24/29/6.9%)
SPY (26/30/6.3%)
GLD (31/23/5.3%)
TLT (17/19/4.3%)
HYG (23/16/3.3%)
EMB (13/13/2.7%)
* -- The first number is the implied volatility rank; the second, 30-day implied volatility; and the third, the percentage the next monthly at-the-money short straddle is paying in credit as a function of stock price.
** -- Currently, PTON is showing some horrible skew on the call side, which can be accommodated via ratio, Jade Lizard, or a "double double" iron condor.
*** -- Double the number of contracts on the put side with the short put at half the delta of the short call and the short call vertical aspect at double the width of the put side. Hence the term "double double."
Comment:
Adding two exchange-traded funds to my "IRA Dividend Payers" section: XLE (current yield 6.81%) and KRE (current yield 3.70%). I would also note that GLD does not pay a dividend.