RRC -- NONEARNINGS PREMIUM SELLING PLAY (OIL AND GAS)

With an IVR/IV of 78/69, here's an oil and gas premium selling play that probably beats my XOP play that did not get filled in a shortened trading day on Friday. Additionally, it's another longer-term play that I look to work to bridge the gap between this earnings season and the next.

Jan 15 22.5/35 short strangle
POP: ~73%
Max Profit: $133/contract
BPE: ~$283
BE's: 21.17/36.33

Comment:

Price has breached the short put side of my setup. I have looked at the possibility of (a) rolling the call side down to capture additional credit (not worth it right now); (b) rolling the entire setup out in an attempt to improve the strike on the put side (the improvement doesn't look like it would be much); or (c) leaving it alone for now ... . I've decided to do nothing for now, opting instead to wait closer to expiration when the value of the short call diminishes more profoundly (it hasn't decreased much since I put it on).

Comment:

I apologize: my software was acting extremely glitchy earlier. Here's what I decided to do now that it appears to be behaving properly: I'm going to roll the 35 short call down to the Jan 15 27.5 short call to capture an additional credit of .36. I'm going to leave the short put side alone for now and then evaluate it more toward expiration or see if I can get a bounce that would allow me to improve the strike price of the short put a little more than just one strike (although that's all you can get sometimes ... ).

Comment:

A recap, first ... . I originally filled a Jan 15 22.5/35 short strangle for a 1.28 credit and then subsequently rolled the 35 short call down to the 27.5 short call for a .36 credit, so I've collected a total of 1.64 in credit for the trade. Price has proceeded to break the short put strike, but not by much, so the question is -- with 25 DTE -- what do I do now? Price, after all, isn't "hugely" below my short put strike (less than 2 strikes) and there is a slight chance that I will get a bounce in the next four weeks such that I can exit either the entire setup or roll the put side out to a more favorable strike for a credit. The alternative is to immediately switch to a defensive mode and roll the short call down to slightly above current price, going either short strangle or slightly inverted, depending on the strike to which I roll the short call (the untested side) ... . Decisions, decisions ... .

Comment:

Playing strict, mechanical defense here, so rolled the short call strike down to 22.5 for an additional .88 credit, leaving me with a Jan 15 22.5/22.5 short strangle. At this point, I've collected a total of 2.52 in credit for the trade, so I'll look to bail on it at or below a 2.52 debit.

Comment:

Rolling the setup out to the Feb 19th expiry for a small credit, improving the short call strike to 25, so now I've got a 22.5/25 short strangle. This is what I get for being too aggressive with intratrade rolling.

Comment:

Rolled the 22.5 short put to the 25 strike (same expiry) for a .40 credit, so now I've got a Feb 19th 25/25 short strangle.