Bunch of options liquid underlyings announcing earnings this week:
IBM (27/36/<10%), Monday, After Market Close SNAP (43/79/18.1%): Tuesday, After Market Close MSFT (29/38/<10%): Wednesday, After Market Close TWTR (44/69/15.8%): Thursday, Before Market Open INTC (24/39/<10%): Thursday, After Market Close
AMZN (70/55/12.5%) (Thursday, After Market Close) and TSLA (48/109/25.4%) (Wednesday, After Market Close) also announce, but options aren't the most liquid here, even though it's tempting to play all that juice in TSLA, with 30-day at 109% and the August 21st at-the-money short straddle paying a 25.4% of the stock price (which has gone parabolic).
From a buck banging standpoint, SNAP and TWTR look to be the potentially most productive for pure volatility contraction plays. Pictured here is an August 21st 20/29 directionally neutral short strangle, which was paying 1.39 as of Friday close. For those of a defined risk bent, consider something akin to the 18/21/28/31, which was paying slightly greater than one-third the width of the wings at 1.10 or a similar setup.
The TWTR August 21st 31/41 was paying 2.06 with a one-third-the-wing-width setup preliminarily being something like the 29/32/40/43, paying 1.21.
Naturally, strikes may have to be adjusted, depending how the underlyings move running into earnings.
EXCHANGE TRADED FUNDS ORDERED BY RANK AND SCREENED FOR 30-DAY >35% AND AT-THE-MONEY SHORT STRADDLE PRICE >10% OF STOCK PRICE:
Relative to the past few weeks, volatility has dried up here quite a bit. The August monthly has 33 days left in it, so part of the "not paying" part has to do with duration. My tendency here would be to hold off, waiting until September duration (61 days) comes into range; it's still a little bit lengthy if you want to stick to stuff in that 45 day give-or-take wheelhouse.
BROAD MARKET:
Only IWM (33/37/8.3%) currently has a 30-day in excess of 35%, and that ain't saying much, with the at-the-money short straddle paying less than 10% of the value of the underlying.
IRA SHOPPING LIST/DIVIDEND YIELDERS:
Only EWZ (17/44/10.3%) has a 30-day >35%, along with the August at-the-money short straddle paying >10% of the stock price metric. I've already got a small short put ladder stuck out there (See Post Below), but aren't very tempted to add with the implied being so low within the 52-week range -- in the 17% percentile.
I have the same question, how do you interpret the numbers inside the brackets (IBM (27/36/<10%)) ?
NaughtyPines
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@rodolfo.saldana.castro, The first number is the 52-week implied volatility rank or percentile (i.e., where IV is currently relative to where it's been over the last 52 weeks); the second is the 30-day IV%-age; and the third is what the at-the-money short straddle is paying as a function of stock price. Ideally, I like to see >50 IVR or percentile, >35% IV, and the ATM short straddle paying >10% of the price at which the stock is trading for selling premium in exchange traded funds; >70 IVR or percentile, >50% IV, and the ATM short straddle paying >10% of the price at which the stock is trading for single name (e.g., earnings volatility contraction plays). In this particular example, IBM's IV is in the 27th percentile of where it's been the last 52 weeks; it's 30-day is 36%, and the August 21st at-the-money short straddle is paying <10% of the value of the stock -- in short, an unattractive play for me as a volatility contraction play because 30-day is less than 50%, and the ATM short straddle is paying <10% of the value of the stock. You can naturally play IBM some other way, but it's not all that great as a volatility contraction play, at least for me.
JANNE110
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Hi NP. Really appreciate your analysis and had some good results with NFLX last week. What numbers are those in the brackets (IBM (27/36/<10%)) ?
NaughtyPines
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@JANNE110, See the rather windy explanation above. Lol.
I have the same question, how do you interpret the numbers inside the brackets (IBM (27/36/<10%)) ?