THE WEEK AHEAD: XOP/XLE, GDXJ/GDX, KRE, EWZ, IWM/RUT
EARNINGS:
It's a light week for earnings announcements, which means it's an even lighter week for options liquid underlyings, none of which meet my cut-off for 30-day implied >50%.
EXCHANGE-TRADED FUNDS RANKED BY PERCENTAGE THE JANUARY AT THE MONEY SHORT STRADDLE IS PAYING AS A FUNCTION OF STOCK PRICE:
XOP (18/59/15.8%)
GDXJ (16/42/13.2%)
XLE (26/46/11.6%)
KRE (24/40/11.4%)
GDX (17/40/11.4%)
USO (7/46/11.0%)
EWZ (15/39/10.6%)
SLV (25/38/10.3%)
Honorable Mention:
GLD (23.5/18.5/5.0%)
* * *
Pictured here is an XOP January 15th 46 short put, which was paying .92 as of Friday close (2.04% ROC as a function of notional risk at max; 15.5% annualized at max). I still like bullish assumption, pandemic recovery plays in the oil space, although implied volatility has bled out quite a bit here, and the break even (45.08) would be above the 2020 lows.
GLD gets an honorable mention here due to its being nearly 15% off of its early August highs with the January 15th strike nearest the 16 delta (the 157) paying .94 as of Friday's close (.60% as a function of notional risk at max; 4.6% annualized). The ROC %-age isn't great, however, but if you're looking to establish a gold position, now might be the time to consider starting one. I'm already working one here, (See Post Below), and will consider adding once December out-of-the-money's fall off or I manage them.
Alternatively, look to establish a position in SLV, GDXJ, or the more liquid GDX, all of which are more scalable due to size and provide more bang for your buck, with the GDXJ January 15th 42 paying .70 (1.7% ROC as a function of notional risk; 12.9% annualized), the GDX January 15th 30 paying .40 (1.4% ROC at max; 10.3% annualized), and the SLV January 15th 19 paying .30 (1.6% ROC at max as a function of notional risk; 12.9% annualized at max).
For those of a defined risk bent, the GLD January 15th 153/158 short put vertical was paying .54 at the mid as of Friday close (10.8% ROC at max; 82.1% annualized).
BROAD MARKET
IWM (23/29/7.8%)
QQQ (19/25/6.9%)
DIA (16/22/5.8%)
SPY (13/21/5.3%)
EFA (16/18/4.6%)
Volatility has pissed out mightily here, and the <10% the at-the-money short straddles are paying in the January cycle are reflective of that.
The IWM January 15th 157 short put was paying .94 (.6% ROC at max as a function of notional risk; 4.6% annualized) as of Friday close, which isn't exactly great. Here, defined is more compelling from a pure ROC %-age return perspective (it usually is), with the IWM January 15th 158/163 was paying .54 as of Friday's close (10.8% ROC at max; 82.1% annualized) and its cash-settled counterpart RUT, paying 5.10 for the January 15th 1610/1660 with similar ROC %-age metrics with the short option legs camped out at the 16 delta strike. Naturally, you can be more aggressive, bringing in the setup more toward the expected move.
It's a light week for earnings announcements, which means it's an even lighter week for options liquid underlyings, none of which meet my cut-off for 30-day implied >50%.
EXCHANGE-TRADED FUNDS RANKED BY PERCENTAGE THE JANUARY AT THE MONEY SHORT STRADDLE IS PAYING AS A FUNCTION OF STOCK PRICE:
XOP (18/59/15.8%)
GDXJ (16/42/13.2%)
XLE (26/46/11.6%)
KRE (24/40/11.4%)
GDX (17/40/11.4%)
USO (7/46/11.0%)
EWZ (15/39/10.6%)
SLV (25/38/10.3%)
Honorable Mention:
GLD (23.5/18.5/5.0%)
* * *
Pictured here is an XOP January 15th 46 short put, which was paying .92 as of Friday close (2.04% ROC as a function of notional risk at max; 15.5% annualized at max). I still like bullish assumption, pandemic recovery plays in the oil space, although implied volatility has bled out quite a bit here, and the break even (45.08) would be above the 2020 lows.
GLD gets an honorable mention here due to its being nearly 15% off of its early August highs with the January 15th strike nearest the 16 delta (the 157) paying .94 as of Friday's close (.60% as a function of notional risk at max; 4.6% annualized). The ROC %-age isn't great, however, but if you're looking to establish a gold position, now might be the time to consider starting one. I'm already working one here, (See Post Below), and will consider adding once December out-of-the-money's fall off or I manage them.
Alternatively, look to establish a position in SLV, GDXJ, or the more liquid GDX, all of which are more scalable due to size and provide more bang for your buck, with the GDXJ January 15th 42 paying .70 (1.7% ROC as a function of notional risk; 12.9% annualized), the GDX January 15th 30 paying .40 (1.4% ROC at max; 10.3% annualized), and the SLV January 15th 19 paying .30 (1.6% ROC at max as a function of notional risk; 12.9% annualized at max).
For those of a defined risk bent, the GLD January 15th 153/158 short put vertical was paying .54 at the mid as of Friday close (10.8% ROC at max; 82.1% annualized).
BROAD MARKET
IWM (23/29/7.8%)
QQQ (19/25/6.9%)
DIA (16/22/5.8%)
SPY (13/21/5.3%)
EFA (16/18/4.6%)
Volatility has pissed out mightily here, and the <10% the at-the-money short straddles are paying in the January cycle are reflective of that.
The IWM January 15th 157 short put was paying .94 (.6% ROC at max as a function of notional risk; 4.6% annualized) as of Friday close, which isn't exactly great. Here, defined is more compelling from a pure ROC %-age return perspective (it usually is), with the IWM January 15th 158/163 was paying .54 as of Friday's close (10.8% ROC at max; 82.1% annualized) and its cash-settled counterpart RUT, paying 5.10 for the January 15th 1610/1660 with similar ROC %-age metrics with the short option legs camped out at the 16 delta strike. Naturally, you can be more aggressive, bringing in the setup more toward the expected move.
