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NaughtyPines NaughtyPines VIX, 1D, Long ,
49 10 6
VIX, 1D Long
TRADE IDEA: VIX SEPT 19TH 11/13/13/14 SYNTHETIC BIG LIZARD

People frequently ask under what circumstances I would long a volatility product and, if so, what product I would use. I generally shy away from long setups in instruments that experience either beta slippage or contango erosion such as VXX or UVXY since the vast majority of the time you're rowing against the contango tide -- a pop in volatility is required ...

36 3 2
TWTR, 1D
THE WEEK AHEAD: GOOG, AMZN, TWTR, NFLX, GLD, EEM, SPY

Two biglies announce next week: AMZN, on Thursday after market close, and GOOG, tomorrow after market close. I generally don't play these via options because they are not only large notionally, but options liquidity in them is fairly poor with wide bid/asks, making fair price fills difficult and/or subject to a lot of patient price discovery, which implies that ...

2259 4 8
E61!, D
Implied Volatility Rank Indicator (IVR)

When trading future options, you dont have built in implied volatility. You need to calculate the IV by calculating (volaCloseToday - volaLowest-52weeks)/(volaHighest-52weeks - volaLowest-52weeks). If the IVR is above 40%, then you should think about checking options premium, since premium is currently higher as in former days. In order to see, whether the ...

212 4 5
NFLX, 1D
THE WEEK AHEAD: NFLX, EBAY, IBM, XOP, EWZ, TLT/TBT

We're back into the thick of earnings season again ... . NFLX (rank 64/implied 52) pops the top on Monday after market close, so you're going to want to slap anything you want to do on before session end to take maximum advantage of a volatility contraction play. Pictured here is a 20 delta iron condor in the weekly with a buying power effect of 6.59 per ...

NaughtyPines NaughtyPines PBR, 1D, Long ,
59 0 6
PBR, 1D Long
OPENING: PBR OCT/DEC 11/10 COVERED LONG COMBO

... for a .58/contract credit. Max Profit on Setup: $158/contract (the width of the spread plus the credit received) Max Loss on Setup: $958 (assuming you do nothing and the underlying goes to zero) Break Even: 9.42 Delta: 47.77 Theta: .62 Notes: A small buying power effect, cost basis reduction setup in a high implied volatility petro underlying battered by ...

6 0 3
XOP, 1D
OPENING: XOP SEPT 21ST 42/43 SHORT STRANGLE

... for a 3.45/contract credit. Metrics: Max Loss/Buying Power Effect: Undefined/8.08 (on margin) Max Profit: 3.45/contract Break Evens: 38.55/46.45 Theta: 3.09 Delta: -3.53 Notes: Moving out to the September monthly with a narrow strangle ... . 30-day implied isn't as high as I'd like it to be (currently at 28.8%), but it's the second highest, liquid ...

16 0 3
EWZ, 1W
OPENING: EWZ AUG 17TH 34 SHORT STRADDLE

... for a 2.44/contract credit. Metrics: Max Loss/Buying Power Effect: Undefined/6.94 Max Profit: 2.44 Break Evens: 31.56/36.44 Theta: 3.89 Delta: -14.41 Notes: Going where the volatility is at (again) in exchange-traded funds to sell a little August cycle premium while I wait for the September monthly to be more in that 45 days until expiration sweet spot. ...

NaughtyPines NaughtyPines SLV, 1W, Long ,
70 0 5
SLV, 1W Long
OPENING: SLV AUG/SEPT 15.5/13 CALL DIAGONAL

... for a 1.89/contract debit. Metrics: Max Loss on Setup: $189/contract Max Profit on Setup: $61/contract Break Even: 14.89 versus 14.93 spot Debit Paid/Spread Width Ratio: 75.6% Notes: Taking a directional shot on SLV weakness here. Will look to take profit at 20% of what I put the trade on for ... .

NaughtyPines NaughtyPines TLT, 1W, Short ,
53 0 5
TLT, 1W Short
TRADE IDEA: TLT AUG/SEPT 120/27 DOWNWARD PUT DIAGONAL

Short on strength/horizontal resistance ... . Metrics: Max Profit on Setup: $208/contract Max Loss on Setup: $489/contract Break Even: 122.08 vs. 122.11 spot Debit Paid to Spread Width Ratio: 489/700 = 69.9% Notes: This assumes that this level (122) sticks around or is available at NY open. Ideal profit would be ~20% of what you put it on for (.20 x 4.89 = ...

81 1 10
XLU, 1W
THE WEEK AHEAD: XLU, XRT, EEM, FXI DIRECTIONALS, EWZ PREMIUM

With volatility at somewhat of an ebb here, I'm eyeing exchange-traded funds for directional plays in lieu of just hand sitting. The setup pictured here is of a XLU diagonal with the long dated option out in Dec, the front month in August. I would prefer setting this up as a skip month (Aug/Oct), but an Oct expiry isn't available yet. Here are the metrics: ...

NaughtyPines NaughtyPines XLK, 1D, Short ,
29 0 6
XLK, 1D Short
OPENING: XLK AUG/SEPT 72/76 DOWNWARD PUT DIAGONAL

.... for a 2.74/contract debit. Metrics: Max Loss on Setup: $274/contract Max Profit on Setup: $126/contract Break Even: 73.26 Debit Paid/Spread Width Ratio: 2.74/4 or 68.5% Theta: 1.14 Delta: -39.63 Notes: Selling semicons on strength. Will start to look to take profit at 50% of max.

17 0 5
XOP, 1W
OPENING: XOP AUG 17TH 42 SHORT STRADDLE

... for a 2.90/contract credit. Metrics: Max Loss/Buying Power Effect: Undefined/8.48/contract Max Profit: 2.90/contract Break Evens: 39.10/44.90 Theta: 4.52 Delta: -10 Notes: Just looking to add some more theta to the pile in August in non-single name, as the September monthly remains too far out in time for my tastes. Because of its duration, will start to ...

NaughtyPines NaughtyPines XOP, 1D, Short ,
39 2 5
XOP, 1D Short
TRADE IDEA: XOP SEPT 21ST/JUNE 21ST 41/45 COVERED SHORT COMBO

Another covered short "combo" setup (see Post Below) with the delta metrics of a covered put sans the buying power effect of short stock and plenty of time to work out and/or reduce cost basis ... . Metrics: Max Loss/Buying Power Effect: Undefined/~$1234 Max Profit: $514/contract (realized on finish below the short put) Break Evens: 46.14/no downside risk Delta: ...

NaughtyPines NaughtyPines TWTR, 1D, Long ,
180 0 7
TWTR, 1D Long
OPENING: TWTR AUG 17 48 SHORT STRADDLE

... for a 7.61/contract credit. Metrics: Max Loss/Buying Power Effect: Undefined/~$909/contract Max Profit: $761/contract Break Evens: 40.39/55.61 Theta: 8.64 Delta: 24.9 (Neutral to Bullish) Notes: Another trade attempting to emulate a ~30 delta short put, while bringing in the greater extrinsic of a short straddle. Will take profit at the lesser of 10% of ...

NaughtyPines NaughtyPines EWZ, 1D, Long ,
31 0 5
EWZ, 1D Long
OPENING: EWZ AUG 17TH 35 SHORT STRADDLE

... for a 2.97/contract credit. Metrics: Max Loss/Buying Power Effect: Undefined/~$670/contract Max Profit: $297/contract Break Evens: 32.03/37.97 Theta: 3.15 Delta: 30.73 (Neutral to Bullish) Notes: Here, I'm looking to emulate the delta of a naked 30 delta short put (paying ~.70/contract currently), but bringing in the beefier credit and extrinsic value of a ...

NaughtyPines NaughtyPines QQQ, 1D, Short ,
114 0 5
QQQ, 1D Short
TRADE IDEA: QQQ AUG/DEC 171/176 COVERED SHORT "COMBO"

A "combo" is a two-legged option setup with a "long combo" consisting of a short put and long call sold at the same strike and in the same expiry, and a "short combo" consisting of the inverse -- a short call and a long put sold at the same strike. The short combo emulates a short stock position with static* -100 delta; a long, a long stock position with +100 ...

NaughtyPines NaughtyPines EWZ, 1W, Long ,
35 4 6
EWZ, 1W Long
OPENING: EWZ SEPT 31ST 31 MONIED COVERED CALL

... for a 29.39/debit per one lot. Metrics: Max Loss: 29.39 per contract on setup Max Profit: 1.61 per contract on setup (5.48% ROC) Break Even: 29.39 on setup Delta: 37.54 Theta: 1.40 Notes: Roll the short call out on significant loss of value,* to maintain the desired net delta of the position, and/or to defend the break even. I would note a couple of ...

NaughtyPines NaughtyPines FXI, 1W, Long ,
51 0 7
FXI, 1W Long
TRADE IDEA: FXI AUG/OCT 41/36 "SCAREDY CAT" MONIED CALL DIAGONAL

On occasion, I like to take small directional shots without hanging myself too far out there from a buying power perspective because I lack directional conviction or (more often), I'm working a small account where going full on covered call just isn't an option due to buying power effect. FXI has come quite far off off highs and doesn't appear hugely inclined to ...

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