With the vast majority of options-liquid earnings plays in the rear view mirror, premium selling becomes a search for just plain Jane high implied volatility underlyings. This week, TSLA, RIG, X round out out the top implied volatility single names; EWZ, the exchange-traded fund top implied volatility play. Here are some possible nondirectional setups, which are naturally preliminary ... .
TSLA: The July 20th 225/330 short strangle is paying 10.15 with a 71% probability of profit metric and break evens at 214.85/340.15. Its defined risk counterpart, the 220/230/330/340 iron condor, is paying 2.66 at the mid with a probability of profit of 62% and break evens at 227.34/332.66. Ideally, I'd like to see a 70% probability of profit plus credit received greater than one-third the width of the wings, however, but would be hesitant to bring in the wings on this underlying, since it has a tendency to move big.
RIG: The July 20th 14 short straddle is paying 1.87 with break evens at 12.13/15.87. Throw on a couple of cheap long wings to convert it into an iron fly -- the 11/14/14/17, and you bring in buying power reduction quite a bit over naked without giving up a huge amount of credit: it's paying 1.61 versus a max loss of 1.39 with break evens at 12.39/15.61. With iron flies, I like to see the setup pay at least 1/4 of the width of the longs (here, 6-wide), so this looks like a good, small buying power effect play.
X: The July 20th 32/42 short strangle is paying 1.69 with a 69% probability of profit, break evens at 31.18/42.82. The corresponding 29/32/42/45 iron condor: .82 with break evens at 31.18/42.82. As with the Tesla play, I would like to see more out of the defined risk setup -- one-third the width of the wings in credit ... .
EWZ: The July 20th 34/42 short strangle is paying 1.13 with a probability of profit of 69% and break evens at 32.87/43.13; the 31/34/42/45 iron condor, .75 with 33.25/42.75 break evens and a 66% probability of profit.
Alternatively, the July 20th 33 short straddle is paying 3.88 with 34.12/41.88, with the corresponding 31/38/38/45 iron fly paying 3.50 with a 3.50 max loss metric and break evens of 34.50/41.50. As with the RIG iron fly, the cheap longs bring in buying power effect quite a bit over naked without giving up a ton in credit received ... .
TSLA: The July 20th 225/330 short strangle is paying 10.15 with a 71% probability of profit metric and break evens at 214.85/340.15. Its defined risk counterpart, the 220/230/330/340 iron condor, is paying 2.66 at the mid with a probability of profit of 62% and break evens at 227.34/332.66. Ideally, I'd like to see a 70% probability of profit plus credit received greater than one-third the width of the wings, however, but would be hesitant to bring in the wings on this underlying, since it has a tendency to move big.
RIG: The July 20th 14 short straddle is paying 1.87 with break evens at 12.13/15.87. Throw on a couple of cheap long wings to convert it into an iron fly -- the 11/14/14/17, and you bring in buying power reduction quite a bit over naked without giving up a huge amount of credit: it's paying 1.61 versus a max loss of 1.39 with break evens at 12.39/15.61. With iron flies, I like to see the setup pay at least 1/4 of the width of the longs (here, 6-wide), so this looks like a good, small buying power effect play.
X: The July 20th 32/42 short strangle is paying 1.69 with a 69% probability of profit, break evens at 31.18/42.82. The corresponding 29/32/42/45 iron condor: .82 with break evens at 31.18/42.82. As with the Tesla play, I would like to see more out of the defined risk setup -- one-third the width of the wings in credit ... .
EWZ: The July 20th 34/42 short strangle is paying 1.13 with a probability of profit of 69% and break evens at 32.87/43.13; the 31/34/42/45 iron condor, .75 with 33.25/42.75 break evens and a 66% probability of profit.
Alternatively, the July 20th 33 short straddle is paying 3.88 with 34.12/41.88, with the corresponding 31/38/38/45 iron fly paying 3.50 with a 3.50 max loss metric and break evens of 34.50/41.50. As with the RIG iron fly, the cheap longs bring in buying power effect quite a bit over naked without giving up a ton in credit received ... .