NaughtyPines

THE WEEK AHEAD: JPM, C, WFC, SMH, AND XBI

AMEX:SMH   VANECK VECTORS ETF TRUST SEMICONDUCTOR ETF
Later in the week, we kick off earnings season with a trio of financials: JPM , C, and WFC ,* all of which announce on Friday before market open.

Generally speaking, I haven't played a lot of financials in the past, since their background implied volatility never seems to bump up significantly enough. Here, however, with JPM's implied at 32, C's at 33, and WFC's at 33 -- all toward the upper end of their 52-week ranges, I figured I'd take a look to see whether "this time is different." It looks like it is ... .

The April 20th 23 delta 104/114 short strangle in JPM is paying 1.47 at the mid with break evens at the one standard deviation line, and the corresponding defined risk setup (an iron condor) with strikes at 101/104/114/117 is nearly paying one-third the width of the wings -- a .96/contract credit, with break evens between the expected and a one standard deviation move.

The C April 20th 65/72.5 20 delta short strangle is paying 1.00 even with break evens at the one standard deviation line, implying that a defined risk setup isn't going to pay at least one-third the width of the wings. Moreover, the longs clear of the 20's go 2 1/2 wide ... .

In WFC , the April 20th 49.5/55 22-delta short strangle pays .87/contract with expected move break evens ... .

Out of these three, I'd probably go with the JPM play because the defined risk setup is paying nearly one-third, and the strikes wide of the 20-delta strikes don't go all "wanky." Having strikes in one-wide increments basically everywhere generally leads to fewer rolling headaches. That being said, it's a long way between here and Thursday close, which is when you'd want to look at these underlyings again, adjust your setups accordingly, and see whether they're still worth your while.

On the exchange-traded fund front, the top five implied volatility wise are: OIH (37), SMH (36), XBI (36), XOP (35), and EWZ (32). I'm already in XOP and EWZ plays, so the only thing that makes personal sense for me out of that group are potential plays in SMH or XBI , although I'm sure there's still juice to be had in just short strangling XOP (the May 25th 31.5/38's paying 1.00).

The SMH May 18th 90/108 short strangle (20 delta) pays 2.55 with expected move break evens; its defined risk counterpart, the 87/90/108/111 pays .93, slightly short of the one-third I normally look for, but probably good enough for a less than 40 day until opex setup.

The XBI 75/91 pays 1.98 with expected move break evens; the 72/75/91/94 pays .85 ... .

* -- Given that this trio is closely correlated, it may also be worth taking a look at XLF , although with a background implied of 28, that isn't looking all that juicy at the moment ... .



Comment: An afterthought: The May 18th QQQ 144/167 20-delta, delta neutral short strangle is paying 3.00/contract at the mid with break evens of 141 and 170.
Thanks for your patience with this junk. I see comments come straight up anyhow except for deleting between brackets + brackets stuff. Will actually have to share an idea to test there.
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NaughtyPines Tom1trader
@Tom1trader, No problem. I would also like to avoid the percentages next to the symbols ... . Dollar sign plus symbol, maybe?
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NaughtyPines NaughtyPines
@NaughtyPines, I will also putz when I have a few minutes ... .
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Tom1trader NaughtyPines
@NaughtyPines, Guess will have to post some ideas to try, did not catch it at first but only does it on the orig posting of an idea, not on updates or comments. Happy trading!
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Interesting . . . used brackets on XBI XOP and another and in previous had 2 in brackets - apparently anything between brackets does not post. but quotations (JPM) GLD) (XOP) (XBI) C (C) seems to work okay if I am not "speaking" too soon.
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Hmm, quotation marks work; brackets however can be typed in without a shift so trying now
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Thanks! Nice synopsis as usual. Been curious so want to take this occasion to see if quotes or something around a symbol will stop this page from adding quotes. Such as (JPM) and such. Will see these now, here goes.
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