EARNINGS:
ROKU (64/83) announces earnings on the 13th (Thursday) after market close and looks to be the best play out of earnings announcements occurring next week from a volatility contraction standpoint.
Pictured here is a fairly straightforward short strangle camped out around the 17 delta in the March cycle, paying 5.62 on buying power effect of around 12.50 (45% credit received/effect ratio) on margin. For those looking to define their risk, consider the 90/100/150/160 iron condor, paying 3.37 on buying power effect of 6.63 (50.8% credit received/effect ratio) or some iteration of that where you look to receive one-third the width of the widest wing in credit. There is some call side skew here which you may to consider accommodating via a ratio'd short strangle or a "double double."*
EXCHANGE-TRADED FUNDS WITH EXPIRY IN WHICH AT-THE-MONEY SHORT STRADDLE IS PAYING GREATER THAN 10% OF STOCK PRICE:
XLE (59/22), July
FXI (54/24), August
SMH (51/27), May
USO (48/39), April
XOP (45/36), June
EWW (43/19), September
EWZ (33/27), May
GDXJ (15/27), May
GDX (10/24), June
My general tendency here has been to go with the shortest duration that's paying first (assuming that I'm not already in a play), and then consider longer-dated thereafter. Here, the shortest duration that's paying is in USO (April), followed by SMH, EWZ, and GDXJ (May), and then XOP and GDX (June).
BROAD MARKET FUNDS WITH EXPIRY IN WHICH THE AT-THE-MONEY SHORT STRADDLE IS PAYING GREATER THAN 10% OF STOCK PRICE:
EFA (45/13), December
EEM (42/20), September
QQQ (37/19), September
IWM (34/18), September
SPY (30/15), November
I've been working SPY longer-dated for quite some time now just to have something on in a constant state of theta burn where shorter duration isn't paying. Just for comparison's sake, the EEM September 37/49 is paying 1.14 on a buying power effect of 4.35 (26.2%); the QQQ September 195/257, 5.77 on a buying power effect of 22.94 (25.2%); and the IWM September 142/183, 3.78 on a buying power effect of 16.50 (22.9%) versus the SPY November 280/367, 8.23 on a buying power effect of 33.24 (24.8%).
FUTURES (EXCLUDING CURRENCY/TREASURIES):
/CL (52/40)
/ES (51/16)
/NG (30/39)
/SI (30/18)
/ZC (29/18)
/GC (24/11)
/ZS (15/18)
/ZW (8/37)
VIX/VIX DERIVATIVES:
VIX finished the week at 15.47, with the February, March, and April /VX contracts going for 16.07, 16.27, and 16.70, respectively. The term structure has lost a good deal of the steepness we were enjoying just a few weeks ago when M1-2 contango was at a whopping 19.16% and M4-7 at 6.24% (it's currently 1.25 and 3.45%, respectively) and my tendency would be to probably wait until the February contract drops off to see if a term structure trade is in the offing. They're not exactly paying me huge to go, for example, with an April setup over a March one, with the differential being a scant .43.
* -- E.g., the 2x90/2x95/155/165 iron condor paying 2.91.
ROKU (64/83) announces earnings on the 13th (Thursday) after market close and looks to be the best play out of earnings announcements occurring next week from a volatility contraction standpoint.
Pictured here is a fairly straightforward short strangle camped out around the 17 delta in the March cycle, paying 5.62 on buying power effect of around 12.50 (45% credit received/effect ratio) on margin. For those looking to define their risk, consider the 90/100/150/160 iron condor, paying 3.37 on buying power effect of 6.63 (50.8% credit received/effect ratio) or some iteration of that where you look to receive one-third the width of the widest wing in credit. There is some call side skew here which you may to consider accommodating via a ratio'd short strangle or a "double double."*
EXCHANGE-TRADED FUNDS WITH EXPIRY IN WHICH AT-THE-MONEY SHORT STRADDLE IS PAYING GREATER THAN 10% OF STOCK PRICE:
XLE (59/22), July
FXI (54/24), August
SMH (51/27), May
USO (48/39), April
XOP (45/36), June
EWW (43/19), September
EWZ (33/27), May
GDXJ (15/27), May
GDX (10/24), June
My general tendency here has been to go with the shortest duration that's paying first (assuming that I'm not already in a play), and then consider longer-dated thereafter. Here, the shortest duration that's paying is in USO (April), followed by SMH, EWZ, and GDXJ (May), and then XOP and GDX (June).
BROAD MARKET FUNDS WITH EXPIRY IN WHICH THE AT-THE-MONEY SHORT STRADDLE IS PAYING GREATER THAN 10% OF STOCK PRICE:
EFA (45/13), December
EEM (42/20), September
QQQ (37/19), September
IWM (34/18), September
SPY (30/15), November
I've been working SPY longer-dated for quite some time now just to have something on in a constant state of theta burn where shorter duration isn't paying. Just for comparison's sake, the EEM September 37/49 is paying 1.14 on a buying power effect of 4.35 (26.2%); the QQQ September 195/257, 5.77 on a buying power effect of 22.94 (25.2%); and the IWM September 142/183, 3.78 on a buying power effect of 16.50 (22.9%) versus the SPY November 280/367, 8.23 on a buying power effect of 33.24 (24.8%).
FUTURES (EXCLUDING CURRENCY/TREASURIES):
/CL (52/40)
/ES (51/16)
/NG (30/39)
/SI (30/18)
/ZC (29/18)
/GC (24/11)
/ZS (15/18)
/ZW (8/37)
VIX/VIX DERIVATIVES:
VIX finished the week at 15.47, with the February, March, and April /VX contracts going for 16.07, 16.27, and 16.70, respectively. The term structure has lost a good deal of the steepness we were enjoying just a few weeks ago when M1-2 contango was at a whopping 19.16% and M4-7 at 6.24% (it's currently 1.25 and 3.45%, respectively) and my tendency would be to probably wait until the February contract drops off to see if a term structure trade is in the offing. They're not exactly paying me huge to go, for example, with an April setup over a March one, with the differential being a scant .43.
* -- E.g., the 2x90/2x95/155/165 iron condor paying 2.91.