On initial screen for high rank/high implied, here are next week's potential winners for earnings-related volatility contraction plays: AAPL (31/27) (Tuesday after market close), X (52/54) (Thursday after market close), GILD (30/27) (Tuesday after market close), and BIDU (50/41) (Tuesday, but unspecified as to before or after market close). Because background implied on both AAPL and GILD are <50% (not what I like to see to play an earnings-related volatility contraction), those are cut from the list, leaving X and BIDU .

Pictured here is a tight short strangle in the September cycle paying 1.11/.56 at 50 max as of Friday close, with break evens at 12.89/18.11, and delta/theta metrics of 2.59/1.74. You can naturally go full on short straddle, but giving the setup some room between the put and call will give you the ability to adjust the strikes intra-trade without going inverted to do so, as you might have to if you went with the September 20th 15 short straddle, which is paying 2.29/.57 at 25 max with break evens at 12.71/17.29, and has delta/theta metrics of -10.62/1.99.

The rather unfortunate thing about BIDU is it's an ADR, so the precise announcement date and time is always up in the air until the last moment. That being said, the Sept 20th 95/100/130/135 iron condor is paying 1.46 at the mid (.73 at 50 max), has break evens at 98.54/131.46, and has -.17/1.82 delta/theta metrics. Naturally, I'd ordinarily like to collect one-third the width of the wings in credit, but it's hard to see what that will actually pay with markets showing wide in off hours.


IWM (11/15)
EEM (7/16)
QQQ (6/15)
SPY (6/12)
EFA 0/11

VIX 12.16

Because of low implied in "local expiries" (<45 days 'til expiry or less), I've been going out a little farther in time than usual, taking advantage of implied volatility term structure,* which currently slopes from longer-dated expiries into this current state of affairs, (See RUT Iron Condor Trade, below), with the small added bonus being that longer-dated expiry implied volatility tends to expand less relative to shorter-dated implied volatility in the event of a "local" volatility pop, which is the usual concern with selling premium in low volatility environments. Naturally, I'm not going all crazy with these longer-dated setups, but staying small and keeping powder dry for more favorable volatility metrics in shorter duration expiries.


Top Funds By Rank: GDXJ (78/35), GDX (53/29), SLV (48/20), GLD (39/12), TLT (25/10), SMH (25/24), USO (23/32), XOP (20/30).

GDXJ continues to have ideal exchange-traded fund metrics of >70 rank, greater than 35 implied for premium selling ... .


I pulled the trigger on a couple of "not a penny mores" last week in XLP and XLU . Suffice it to say, I did not get stellar credit collection/cost basis reduction for these, since we're far away from the prices at which I want to acquire, but will look to roll out on weakness and/or in increased volatility . It's either stick something out there and get paid to wait or wait for lower and get paid nothing ... .


/NG, UNG: Natural gas is around 52-week lows here. Generally, I look for a seasonality play where "peak injection" has historically set up, but it's generally a crap shoot as to where that will occur (that pesky Mother Nature), and it's usually later in the year. I'm watching it, but won't get particularly excited to enter something bullish until we break 2.00. Ideally, I'm looking to get in at around that 2016 low ... .

* -- You can see this in RUT, with August implied at 15.3%, September at 16.1%, October at 16.7%, and December at 17.6%.
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