ESV extending its decline beyond the Brent move, opening a divergence. Gap should fill.
It's also close to previous major bottoms.
Sentiment on extreme low.
Demark indicators pointing for reversal.
Personally, I'm not doing a ton here beyond looking at cleaning up remaining December cycle setups and evaluating whether there are poo piles that should be looked at for the taking of tax loss in the margin account before year's end. Nevertheless, here's an outline of what's potentially playable in the coming week ... .
ADBE (81/49) announces earnings on ...
I think $HAL is poised to rise up to 50% from here, it tested a monthly support and held up, and is now shooting up with oil coming out of a correction. I'm entering positions at market open, and looking to add over time as the trend develops, if it does bottom here as I see it now.
Best of luck,
Earnings With >70 Rank/>50 Implied:
No underlyings with highly liquid options with earnings announcements in the next week. With single names with earnings announcements in the rear view mirror, we're looking at earnings starting up again in the January cycle; I'd rather just play those closer to the announcement, rather than get caught up in a volatility ...
... for a 2.62/contract credit.
Max Profit on Setup: $138/contract
Max Loss on Setup: $262/contract
Debit Paid to Spread Width Ratio: 65.5%
Break Even: 18.62 vs. 18.60 spot
Notes: Taking a bullish assumption directional shot in OIH with plenty of time to work out/reduce cost basis ... . Will look at taking profit at 50% max.
SLB and HAL 2 examples of top holdings. It's time for the down trend pressure to end for now. This is a slow moving sector and most all stocks in this space gaped lower after last earnings. Time to create a shopping list if dip buyers show up.
- They are "Twins" in long term.
- In short term, since last high on MAY 17, 2018, OIH is weaker than XLE.
- Lower lows and lower highs for OIH
- OIH is on the supportive price formed by last two reversing points
- XLE does not hit the lower, instead it has a higher low which looks like it has reversed the downtrend
If XLE is the right, it means OIH has found or ...
... for a 2.36/contract credit.
Probability of Profit: 55%
Max Profit: $236/contact
Max Loss/Buying Power Effect On Margin: Undefined/$525/contract
Break Evens: 23.64/28.36
Notes: Did this from my phone on Friday ... . Although I like to see >35% background implied volatility when pulling the trigger on these, at 30.3%, this ...
The only earnings play coming up next week that currently interests me from a premium selling/volatility contraction standpoint is MU -- with a background implied volatility in the 60's -- which announces earnings on Thursday after market close. Neither ORCL nor FDX -- which announce Monday and Tuesday respectively -- have sub-30 implied volatility, although ...
With the VIX dropping hard below 15, some of the juice has poured out of the cup ... . Even so, there remain a few plays in the market.
ADBE announces earnings on the 15th (Thursday) after market close. The volatility metrics don't quite meet my criteria for a volatility contraction play (56/32), but the March 23rd 210/323.5 short strangle is paying 3.80 at the ...
This is a Poor Man's Covered Call, with the 90 delta July long call standing in as your stock, and the April 20th 26 short call functioning as it would in a covered call situation. Your max loss is the difference between what you paid for the long (currently 6.28 at the mid) minus what you received for the short call (currently .69 at the mid). Consequently, you ...
EARNINGS ANNOUNCEMENT/VOL CONTRACTION PLAYS:
M announces earnings on 2/27 before market open. Preliminarily, the March 24/30 short strangle is paying .84 at the mid, which isn't very juicy. Given the size of the underlying, it may be more amenable to a short straddle or iron fly, with the March 9th 27 short straddle paying 2.95 and the 23/27/27/31 iron fly ...
... for a .97/contract credit.
Probability of Profit: 62%
Max Profit: $97/contract
Max Loss: $2303
Break Even: 23.03
* -- Assuming price goes to zero and you do no rolls or take other loss mitigation measures (e.g., sell short call verts against, etc.).
Notes: With background implied volatility greater than 35% and with the recent sell-off in both oil ...