EARNINGS:
SQ (77/59) announces Wednesday after market close and has the volatility metrics I'm looking for out an earnings-related volatility contraction play -- implied in the 70th percentile or greater over the past 52-weeks and 30-day at or greater than 50%.
Pictured here is an SQ April 17th 72.5/100 short strangle camped out around the 20 delta paying 3.55 on a buying power effect of 8.37 (42.4%) and delta/theta metrics of .66/7.78. For those high on defined, consider the 65/70/95/100, paying 1.58 (46.2% credit received as a function of buying power effect).
EXCHANGE-TRADED FUNDS ORDERED BY RANK/30-DAY IMPLIED AND SHOWING THE EXPIRY IN WHICH THE AT-THE-MONEY SHORT STRADDLE IS PAYING >10% OF STOCK PRICE:
SMH (73/30), May
XLE (63/23), July
USO (51/37), April
XBI (48/30), June
XOP (45/37), May
FXI (40/23), August
GDX (40/29), May
GDXJ (38/33), May
EWZ (26/27), June
I didn't get an opportunity to do a ton last week beyond take off a few setups in profit, so this is probably an opportunity to build up theta pile in stuff that I don't have plays in currently and to add to stuff via delta under hedge that has experienced an up tick in volatility over the past several days.
BROAD-MARKET ORDERED BY RANK/30-DAY IMPLIED AND SHOWING THE EXPIRY IN WHICH THE AT-THE-MONEY SHORT STRADDLE IS PAYING >10% OF STOCK PRICE:
QQQ (59/23), September
SPY (43/17), November
IWM (42/19), September
EEM (37/19), September
In spite of the expansion of volatility over the last several days, broad market isn't paying fabulously in shorter duration, so if you're going to play, look to start out small, add small over time, and take profit somewhat aggressively.
FUTURES:
/GC (70/15)
/CL (51/36)
/NG (47/39)
/ZS (43/19)
/ES (42/17)
/SI (33/89)
/ZW (24/24)
/ZC (23/13)
VIX/VIX DERIVATIVES:
VIX finished the week at 17.08 with the March, April, and May /VX futures contracts trading at 17.05, 17.33, and 17.09 respectively. It's tough to divine what /VX futures traders' thought processes are here, but it looks like they may be focused on the exogenous event of the year -- the expiry around the general elections, where there is a huge term structure "hump" from September (currently trading at 17.75) to October (20.55), with the remainder of the preceding structure being fairly flat in the interim. There is a mere .70 differential between the March contract price and the September one which I regard as unusually flat, which doesn't make for good term structure trades. Naturally, at some point, the term structure may adjust to a more "standard look," but in the mean time, look to add short to VIX derivatives (VXX, UVXY) on pops to VIX > 20% via short call vertical or long put vertical with a break even at or above where the underlying is currently trading and shooting for one-third the width in credit (if a credit spread; don't pay more than 2/3rds the width if a debit spread).
SQ (77/59) announces Wednesday after market close and has the volatility metrics I'm looking for out an earnings-related volatility contraction play -- implied in the 70th percentile or greater over the past 52-weeks and 30-day at or greater than 50%.
Pictured here is an SQ April 17th 72.5/100 short strangle camped out around the 20 delta paying 3.55 on a buying power effect of 8.37 (42.4%) and delta/theta metrics of .66/7.78. For those high on defined, consider the 65/70/95/100, paying 1.58 (46.2% credit received as a function of buying power effect).
EXCHANGE-TRADED FUNDS ORDERED BY RANK/30-DAY IMPLIED AND SHOWING THE EXPIRY IN WHICH THE AT-THE-MONEY SHORT STRADDLE IS PAYING >10% OF STOCK PRICE:
SMH (73/30), May
XLE (63/23), July
USO (51/37), April
XBI (48/30), June
XOP (45/37), May
FXI (40/23), August
GDX (40/29), May
GDXJ (38/33), May
EWZ (26/27), June
I didn't get an opportunity to do a ton last week beyond take off a few setups in profit, so this is probably an opportunity to build up theta pile in stuff that I don't have plays in currently and to add to stuff via delta under hedge that has experienced an up tick in volatility over the past several days.
BROAD-MARKET ORDERED BY RANK/30-DAY IMPLIED AND SHOWING THE EXPIRY IN WHICH THE AT-THE-MONEY SHORT STRADDLE IS PAYING >10% OF STOCK PRICE:
QQQ (59/23), September
SPY (43/17), November
IWM (42/19), September
EEM (37/19), September
In spite of the expansion of volatility over the last several days, broad market isn't paying fabulously in shorter duration, so if you're going to play, look to start out small, add small over time, and take profit somewhat aggressively.
FUTURES:
/GC (70/15)
/CL (51/36)
/NG (47/39)
/ZS (43/19)
/ES (42/17)
/SI (33/89)
/ZW (24/24)
/ZC (23/13)
VIX/VIX DERIVATIVES:
VIX finished the week at 17.08 with the March, April, and May /VX futures contracts trading at 17.05, 17.33, and 17.09 respectively. It's tough to divine what /VX futures traders' thought processes are here, but it looks like they may be focused on the exogenous event of the year -- the expiry around the general elections, where there is a huge term structure "hump" from September (currently trading at 17.75) to October (20.55), with the remainder of the preceding structure being fairly flat in the interim. There is a mere .70 differential between the March contract price and the September one which I regard as unusually flat, which doesn't make for good term structure trades. Naturally, at some point, the term structure may adjust to a more "standard look," but in the mean time, look to add short to VIX derivatives (VXX, UVXY) on pops to VIX > 20% via short call vertical or long put vertical with a break even at or above where the underlying is currently trading and shooting for one-third the width in credit (if a credit spread; don't pay more than 2/3rds the width if a debit spread).