Risking one to make one at all time highs in a low volatility environment ... .
Metrics:
Probability of Profit: 52%
Max Profit: 1.01 ($101)/contract
Max Loss/Buying Power Effect: .99 ($99)/contract
Break Even: 294.01
Theta: .10
Delta: -10.1
Notes: If it fills, it fills ... . Will look to take profit at 50% max.
Although both FDX and ORCL announce earnings tomorrow (Monday) after market close, the underlying with the implied volatility metrics I generally look for in a volatility contraction play are present in MU, which announces Thursday after market close.
With a rank of 82 and a 30-day of 60%, the 70% probability of profit 39/52.5 20-delta short strangle is paying...
... for a 1.31/contract credit.
Probability of Profit: 64%
Max Loss/Buying Power Effect: Undefined/5.95/contract
Max Profit: 1.31/contract
Break Evens: 37.69/45.31
Theta: 2.53
Delta: -4.15
Notes: Shooting for 50% max; adjust at skew out to +/- 30 delta.
... for a 9.26/contract debit.
Max Profit: $74/contract
Max Loss: $926/contract
Break Even/Cost Basis: 9.26/share
Theta: 1.67
Delta: 23.56
Notes: Going directly to a monied covered call in this high implied volatility underlying (121%) with a mildly bullish delta metric. Now that I look at it, the 10 short put (25.78 delta) in October has a better max (1.03)...
... for a 10.02/contract debit.
Max Profit: $98/contract
Max Loss: $1002/contract
Break Even/Cost Basis: 10.02/share
Theta: 1.23
Delta: 46.78
Notes: High rank and implied (84/57). Going with the cost basis reduction setup without a timer on it ... .
The setup consists of a long combo (a Jan '20 10 short put + a Jan '20 10 long call) and a November 16th 10 short call. The combo aspect of the setup acts as synthetic stock, with a static 100 delta metric, and the short call works as it would in an ordinary covered call.
Max Profit: $93/contract
Max Loss/Buying Power Effect: $907/contract/$335/contract
Break...
... for a 1.13/contract credit.
Probability of Profit: 71%
Max Loss/Buying Power Effect: Undefined/3.62/contract
Max Profit: 1.13/contract
Break Evens: 29.87/42.13
Theta: 2.88
Delta: -3.49
Notes: Post-earnings, still some decent premium to be had here (30-day at 40.3%). Take profit at 50%/manage at skew out to +/- 30 delta.
Looking at what's left of the trading week post-Labor Day ... .
AVGO (announcing earnings on Thursday after market close) is the only fairly liquid underlying that interests me for an earnings-related volatility contraction play (rank 57/30-day 37). The 63% probability of profit Sept 21st 200/205/235/240 iron condor pictured here is preliminarily going for 1.65...
A quick, dirty of next week:
EARNINGS WITH FAVORABLE METRICS FOR A VOLATILITY CONTRACTION PLAY
BABA (86 rank/41% 30-day) announces on 8/23 (Thursday) before market open.
Sept 21st 155/195 short strangle (16 delta), 3.68 credit.
Sept 21st 150/155/195/200 iron condor, 1.32 credit.
Notes: With the defined risk, you'll need to bring the wings in a touch more or...
... for a .04/contract credit.
Max Profit on Setup: $4/contract
Max Loss on Setup: $196/contract (width of the spread minus credit received)
Break Even on Setup: 19.96
Delta: 27.37
Theta: .43
Notes: Taking a small bullish shot on gold weakness here with a net credit, calendarized short put vertical. Naturally, I'm not collecting much credit here on fill, but...
... for a 1.05/contract credit. High rank/implied (100/78).
Metrics:
Probability of Profit: 73%
Max Profit: 1.05 ($105)/contract
Max Loss/Buying Power Effect: Undefined/$194/contract
Break Even: 17.95
Delta: 27.47
Theta: 2.17
Notes: Taking advantage of the Turkish meltdown to sell some puts.
The only volatility contraction earnings play I'm looking at for this coming week is in Macy's, which announces earnings on Wednesday before market open, since it has the implied volatility rank and 30-day metrics I'm looking for (76/56).
Here are some Macy's preliminary setups, with the short strangles set up around the 20 delta strikes:
August 17th 36/44 short...
Earnings season is imminent here for most companies. A few of the industrials have been reporting recently too. I decided I'd throw a little premium on in here.
-1 Sep21 $75 straddle for $3.43 cr.
Risk: 1.5-2x credit received
Profit: 25-30% of credit received.
If we get a down move, I may just take the call off and then roll out the put. We'll see how this...
... for a 1.31/contract credit.
Probability of Profit: 62%
Max Profit: 1.31 ($131)/contract
Max Loss/Buying Power Effect: Undefined/6.68 ($668)
Break Evens: 38.69/45.31
Delta: 3.65
Theta: 2.75
Notes: Giving myself more room to be wrong with a short strangle in the September cycle. Implied volatility remains so-so here at 24.7% (near the bottom of its 52-week...
