Unless you've been living under a rock somewhere, you'll know that last week we experienced a pop in VIX. Ordinarily, this would get me somewhat excited to put on broad market index exchange-traded fund stuff in SPY, IWM, and QQQ. However, running my standard defined risk setups in those underlyings has led to minor disappointment -- while they are paying more than last week due to the increase in implied volatility, they still aren't paying enough, in my opinion, to bother with putting on; we simply need higher back month implied volatility for those to pay if I'm going to stick to my guns and only put these on when they're paying at least one-third the width of the widest wing. Even if I go out to the October expiry, a 20-delta three wide is only paying .91 in the QQQ's, .81 in IWM, and .81 in SPY (at this point in time, going with the September expiry is too close in time; October's too far out; and the September quarterly needs to populate a touch more to be workable, so that set of circumstance militates in favor of just waiting anyhow).
As far as earnings are concerned, there are couple of underlyings with >70 implied volatility rank and >50% implied volatility that might be worth doing earnings plays on: DKS, which announces on Tuesday before market open and FL, which is tentatively scheduled for some time on Friday.
With non-earnings, only TEVA has the metrics I'm looking for. Because of the size of the underlying, I'd probably go short straddle or fly; the Sept 15th 17.5 short straddle is paying 2.21 with break evens slightly wide of the expected move, and the Sept 22nd 13.5/17.5/17.5/21.5 iron fly (you'll want to go with a weekly to have access to half strikes), is paying 2.08 with a buying power of effect of 1.92, theta of 1.30, and 2.27 long delta. For traders who are not adverse to acquiring shares of this beaten-down generic drug maker, the September 20 delta short put at the 15 strike is paying .37 at the mid with a break even of 14.63; the Sept 29th 15 is paying .47 at the mid with a break even of 14.53. A more aggressive play would be the September 29th 30 delta at 15.5, paying .61 with a break even of 14.89.
Because of the VIX pop, a "Term Structure" play may be in the offing. Although the first VIX future trading at greater than 16 is in the January expiry (156 days out), the November 16/19 short call vertical (93 days out) is paying .70 at the mid, which is what I look for in these plays (.65-.75 for a three wide). That being said, September, October, November, and December expiries maintain a flat aspect relative to spot here, trading at 15.27, 15.52, 15.73, and 15.72, so it may be worthwhile to wait and see if those front months "smooth out" such that each successive back month is higher than the previous one. The current structure is basically trading with "flat volatility" in mind between 15.25 and 15.75 from September to year's end .... .
As far as earnings are concerned, there are couple of underlyings with >70 implied volatility rank and >50% implied volatility that might be worth doing earnings plays on: DKS, which announces on Tuesday before market open and FL, which is tentatively scheduled for some time on Friday.
With non-earnings, only TEVA has the metrics I'm looking for. Because of the size of the underlying, I'd probably go short straddle or fly; the Sept 15th 17.5 short straddle is paying 2.21 with break evens slightly wide of the expected move, and the Sept 22nd 13.5/17.5/17.5/21.5 iron fly (you'll want to go with a weekly to have access to half strikes), is paying 2.08 with a buying power of effect of 1.92, theta of 1.30, and 2.27 long delta. For traders who are not adverse to acquiring shares of this beaten-down generic drug maker, the September 20 delta short put at the 15 strike is paying .37 at the mid with a break even of 14.63; the Sept 29th 15 is paying .47 at the mid with a break even of 14.53. A more aggressive play would be the September 29th 30 delta at 15.5, paying .61 with a break even of 14.89.
Because of the VIX pop, a "Term Structure" play may be in the offing. Although the first VIX future trading at greater than 16 is in the January expiry (156 days out), the November 16/19 short call vertical (93 days out) is paying .70 at the mid, which is what I look for in these plays (.65-.75 for a three wide). That being said, September, October, November, and December expiries maintain a flat aspect relative to spot here, trading at 15.27, 15.52, 15.73, and 15.72, so it may be worthwhile to wait and see if those front months "smooth out" such that each successive back month is higher than the previous one. The current structure is basically trading with "flat volatility" in mind between 15.25 and 15.75 from September to year's end .... .