EARNINGS:
The only underlying that interests me for an earnings announcement-related volatility contraction play this coming week is TWTR (62/67).
Preliminary Setups:
March 15th 28/38 Short Strangle (Pictured): 1.73 credit (.87 at 50% max), break evens at 26.27/39.73, -8.98 delta, 4.78 theta.
March 15th 25/28/38/41 Iron Condor: 1.01 credit (.50 at 50% max), break evens at 26.99/39.01, -1.45 delta, 1.70 theta.
March 15th 33 Short Straddle: 5.24 credit (1.31 at 25% max), break evens at 27.76/38.24, -10.32 delta, 8.27 theta.
March 15th 24/33/33/42 Iron Fly: 4.70 credit (1.17 at 25% max), break evens at 28.30/37.70, -3.87 delta, 3.70 theta.
Notes: As you can see by the chart, it has a tendency to move somewhat big around earnings. Although it's small enough to short straddle, I would lean toward the short strangle or iron condor for a play, since it gives you greater adjustment flexibility intratrade than, for example, the iron fly, although you can always invert the short straddle if the move is overly large.
NON-EARNINGS SINGLE NAME
TSLA (20/58)
X (23/44)
FCX (20/42)
NFLX (21/39)
Notes: I'm not hugely keen on nondirectional premium selling in these given their rank metrics. From a price action standpoint, I could see re-upping with a bullish directional assumption play in FCX on weakness (i.e., upward call diagonal, short put, short straddle with a bullish delta metric), but will have to price something out during the New York session to see whether it makes sense. Out of the money short puts in March don't appear to be paying squat, but the April 11's (37 delta) are paying .60 with a 10.40 break even (a 9.6% discount over current price), which would make for a fairly decent "wheel" play ... .
EXCHANGE-TRADED FUNDS/MAJORS
Petro continues to grove on good background volatility, even though the rank metrics aren't there, with USO at 22/33, OIH at 24/31, and XOP at 14/30 (all at the low end of their 52-week ranges), with my go-to XOP still paying 2.44 at the mid for the March 15th 31 short straddle (.61 at 25% max). It's not great, but it's not yet "marginal."
On the majors front, volatility has bled out of the market with QQQ at 21/20, IWM at 20/18, DIA at 20/17, and SPY at 30/16. A VIX at 16.14 doesn't exactly constitute a "come hither" look, so would hand sit on buying power for a richer premium selling environment.
The only underlying that interests me for an earnings announcement-related volatility contraction play this coming week is TWTR (62/67).
Preliminary Setups:
March 15th 28/38 Short Strangle (Pictured): 1.73 credit (.87 at 50% max), break evens at 26.27/39.73, -8.98 delta, 4.78 theta.
March 15th 25/28/38/41 Iron Condor: 1.01 credit (.50 at 50% max), break evens at 26.99/39.01, -1.45 delta, 1.70 theta.
March 15th 33 Short Straddle: 5.24 credit (1.31 at 25% max), break evens at 27.76/38.24, -10.32 delta, 8.27 theta.
March 15th 24/33/33/42 Iron Fly: 4.70 credit (1.17 at 25% max), break evens at 28.30/37.70, -3.87 delta, 3.70 theta.
Notes: As you can see by the chart, it has a tendency to move somewhat big around earnings. Although it's small enough to short straddle, I would lean toward the short strangle or iron condor for a play, since it gives you greater adjustment flexibility intratrade than, for example, the iron fly, although you can always invert the short straddle if the move is overly large.
NON-EARNINGS SINGLE NAME
TSLA (20/58)
X (23/44)
FCX (20/42)
NFLX (21/39)
Notes: I'm not hugely keen on nondirectional premium selling in these given their rank metrics. From a price action standpoint, I could see re-upping with a bullish directional assumption play in FCX on weakness (i.e., upward call diagonal, short put, short straddle with a bullish delta metric), but will have to price something out during the New York session to see whether it makes sense. Out of the money short puts in March don't appear to be paying squat, but the April 11's (37 delta) are paying .60 with a 10.40 break even (a 9.6% discount over current price), which would make for a fairly decent "wheel" play ... .
EXCHANGE-TRADED FUNDS/MAJORS
Petro continues to grove on good background volatility, even though the rank metrics aren't there, with USO at 22/33, OIH at 24/31, and XOP at 14/30 (all at the low end of their 52-week ranges), with my go-to XOP still paying 2.44 at the mid for the March 15th 31 short straddle (.61 at 25% max). It's not great, but it's not yet "marginal."
On the majors front, volatility has bled out of the market with QQQ at 21/20, IWM at 20/18, DIA at 20/17, and SPY at 30/16. A VIX at 16.14 doesn't exactly constitute a "come hither" look, so would hand sit on buying power for a richer premium selling environment.