... for a 1.04/contract credit.
With implied volatility fairly low across the board, going small, defined in the exchange-traded fund with the highest background implied volatility on the board (30.9%) to keep powder dry for something sexier to come along ... . Shorts nearest the 25 delta strike, longs nearest the 10 with slightly more than one-third the width...
... for a 2.57/contract credit (cost basis of 212.43/share).
Notes: Here, I'm looking to acquire additional SPY shares, but only at a potential 25% discount from current price. Otherwise, I want to get paid to wait and/or reduce cost basis in the meantime. Because expiries are skip month (March, June, September, December, etc.), will look to roll out for...
TWTR (41/54) announces earnings on Tuesday before market open; pictured here is a May 17th 30/39 short strangle.
Max Loss/Buying Power Effect: Undefined/3.50/contract
Max Profit: 1.09
Break Evens: 28.91/40.09
Front Week to May Opex Volatility Differential: 41.5%
Notes: Look to put a play on in the waning hours of the Monday...
... for a 1.10/contract credit.
Max Loss/Buying Power Effect: Full notional
Max Profit: $110/contract
Break Even on Setup: 123.90 (18.4% discount over where the underlying is currently trading if assigned)
Delta: 10.93 (Current)
Theta: 1.36 (Current)
Notes: While I'm sitting on my hands a bit here, I figured I post one of my kid's "Not A Penny More"...
Albeit lazily drawn, I present the dreaded “vomiting camel” pattern. I’m not making this shit up. There’s actually a pattern you can look for that is a serious fucking bear when you do. It’s got this ridiculous name for obvious reasons, but here it is and I’ve decided on the 4/46 long put, 17 strike. It cost .66 and is at .69 as of 1053am 4/12. I’m not going to...
NFLX and IBM both announce on Tuesday after market close, so look to put on something in the waning hours of Monday's session if you're going to do a volatility contraction play.
Pictured here is a NFLX (42/46) 25/10 iron condor,* with the short option strikes at the 25 delta; the longs at the 10 (as of Friday close). Metrics: $825 max profit; $1675...
... for a 1.67/contract credit.
Max Profit: 1.67 ($167)
Max Loss/Buying Power Effect: 3.33 ($333)
Break Evens: 83.33/99.67
Notes: Some nondirectional premium selling here in an exchange-traded fund with high implied (24.8%) relative to the broad market; going 25 delta with the shorts, five-wide with the longs and collecting...
Trade of the Week (May Cycle):
Pictured here is an EWZ (29/34) May 17th 37/45 short strangle: 1.14 credit, .57 at 50% max, break evens at 35.86/46.14, delta -1.46, theta 2.87.
Obvious Alternatives: EWZ May 17th 41 short straddle, 3.91 credit, .98 at 25% max, break evens at 37.09/44.91, delta -4.6, theta 4.01.
Notes: Pros: High implied, high implied relative to...
IV30: 21.7, IVR: 50%, ATMIV: 16.2
+0.18D Long 1 Call: 120 Strike @ $0.25
-0.29D Short 1 Call: 119 Strike @ $0.49
-0.11D Credit: $0.24
Comments: Looking for a short term drop to 1ATR low from the 21EMA.
Although VIX finished the week above the low volatility environment zone (<15) at 16.48, not much is enticing here from a premium selling standpoint at first glance. Earnings announcements are now down to a trickle, with the next quarter's announcements coming into range in the May cycle, militating in favor of putting on earnings-related volatility contraction...
... for a 1.03 credit/contract.
Max Profit: $103
Max Loss/Buying Power Effect: Undefined/~3.85
Break Evens: 26.97/34.03
Notes: Going directionally neutral short strangle here with 30-day implied more than twice that of the broad market and giving myself a little room to manage intratrade. Will look to take profit at 50% max (.51).
Three earnings announcements interest me this coming week from a volatility contraction standpoint: TLRY (--/79),* announcing on Monday after market close; MU (45/51) -- Wednesday after market close, and CAG (86/45), Thursday, before market open.
CAG: Pictured here is a CAG April 18th 22/24/25 Jade Lizard, which was 1.03 at the mid as of Friday close, giving it a...