NaughtyPines

THE WEEK AHEAD: TWTR, MGM, AMD EARNINGS; JETS, XOP, GDXJ

NYSE:TWTR   Twitter Inc
EARNINGS:

If you like to play earnings for volatility contraction, there are a ton this coming week. Here are the ones that made my cut for volatility contraction plays based on options liquidity and bang for your buck as a function of stock price:

TWTR (49/73/15.9%),* announcing Thursday after market close.
MGM (16/69/15.2%), announcing Thursday before market open.
JBLU (22/73/14.6%), announcing Tuesday before market open.
TECK (20/64/14.1%), announcing Tuesday before market open.
AMD (30/62/14.0%), announcing Tuesday after market close.
BA (19/59/12.4%), announcing Wednesday after market close.
FB (47/52/11.1%), announcing Thursday after market closes.

Honorable Mentions:

AMZN (63/51/11.2%), announces Thursday after market close. (Option illiquid).
AAPL (36/47/9.8%), announces Thursday after market close. (November 20th short straddle paying less than 10% of stock price).
GOOG / GOOGL ( 40 / 40 /8.6%), announce Thursday after market close. (Options illiquid).
MSFT (32/ 40 /8.2%), announces Tuesday after market close. (November 20th short straddle paying less than 10% of stock price).

Pictured here is a TWTR short strangle in the November 20th expiry (26 days) with the short options camped out at the 22 delta. Paying 2.72 at the mid price as of Friday close, it has -.55/10.56 delta/theta metrics and break evens wide of 2 times the expected move on the call side, between the expected and 2x on the put.

For those of a defined risk bent, the uneven winged** November 20th 40 /44.5/60/65 iron condor pays 1.50, has delta/theta metrics of 2.53/3.43, and has a 2x expected move break even on the call side and an expected move break even on the put.

MGM: Short straddle or iron fly with risk one to make one metrics; 25% of credit received take profit.
JBLU: Short straddle or iron fly with risk one to make one metrics; 25% of credit received take profit.
TECK: Short straddle or iron fly with risk one to make one metrics; 25% of credit received take profit.
AMD: Short strangle with 2 x expected move metrics; iron condor paying one-third the width of the wings; 50% of credit received take profit.
BA: Short strangle with 2 x expected move metrics; iron condor paying one-third the width of the wings; 50% of credit received take profit.
FB: Short strangle with 2 x expected move metrics; iron condor paying one-third the width of the wings; 50% of credit received take profit.


EXCHANGE-TRADED FUNDS RANKED BY BANG FOR YOUR BUCK AND SCREENED FOR THE DECEMBER AT-THE-MONEY SHORT STRADDLE PAYING >10% OF STOCK PRICE:

JETS (12/50/16.1%)
XOP (15/56/16.0%)
GDXJ (17/49/15.1%)
SLV (36/48/13.9%)
EWZ (17/43/13.3%)
XLE (26/44/12.6%)
GDX (16/ 40 /12.6%)
XBI (30/41/11.6%)
SMH (21/35/10.3%)
EWW (23/35/10.0%)

I threw JETS in here due to continued high implied volatility in airlines which is sticking in there even for names that have already announced "earnings" (or lack thereof) (e.g., DAL (63.5%), UAL (80.7%), AAL (106.6%)).


BROAD MARKET:

QQQ (30/34.9.7%)
IWM (29/33/9.0%)
SPY (23/27/7.6%)
EFA (23/24/6.3%)


IRA DIVIDEND-PAYERS SCREENED FOR THE DECEMBER AT-THE-MONEY SHORT STRADDLE PAYING >10% OF STOCK PRICE:

KRE (25/45/13.3%)
XLE (26/44/12.6%)
EWZ (17/43/13.3%)

* -- The first metric is the implied volatility rank (where 30-day implied volatility is relative to where it's been over the past 52 weeks); the second, implied volatility in expiry nearest 30 days until expiry; and the third -- for earnings: what the November at-the=money short straddle is paying as a function of stock price; for exchange-traded funds, broad market, and IRA dividend-payers, what the December at-the-money short straddle is paying as a function of stock price. For lack of a better term, I've dubbed this last metric as the "bang for your buck".
** -- Only 5-wides are available on the call side.

Comments

Thank you for this! When are you entering a trade like these?
Reply
NaughtyPines judgeFredd
@judgeFredd, Ideally, in the session immediately preceding the earnings announcement.
Reply
Great stuff as always !
Reply
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