... for a 3.08/contact credit.
Max Profit: $308/contract
Max Loss/Buying Power Effect: Undefined; ~$180/contract (on margin)
Break Evens: 5.92/12.08
Notes: A small bullish assumption play in a small underlying with high 30-day implied at 77.4%. Going out farther than usual in time because it won't tie up much buying power in...
... for a 1.56/contract debit.
Notes: TLT is in a really low implied volatility state (30-day at 9.5%) and at or near horizontal resistance in the 122-123 area. With a June hike being talked about in terms of timing of the next hike, I figured I'd put on a calendar to potentially benefit from that scenario, which would lead to a downturn in the underlying along...
... for a 2.00/contract credit.
Max Profit: $200
Max Loss: $200
Break Evens: 17.00/21.00
Notes: A classic risk one to make one iron fly. Will look to take profit at 25% max.
BIDU (44/42), RIG (33/56), and TEVA (49/53) announce earnings this week, with TEVA looking for a March to April volatility contraction of about 15%, BIDU, approximately 7.7%, and RIG, 6.9%. Instead of looking to play these pre-announcement for a volatility contraction (the contraction percentages aren't that compelling), I'll look to potentially short...
... for a 1.22/contract credit.
Doing a smidge of defined risk, all-weather, broad market instrumentation here ... .
The metrics aren't much to look at, because they aren't static,* but here they are:
Max Loss/Buying Power Effect on Setup: $378/contract
Max Profit on Setup: $122
As far as intratrade management is concerned: Look to roll...
On January 4th, we wrote a speculative trade piece for the January 16th Constantinople Fork. Today we will aim to replicate those trade ideas for the second attempt of the Constantinople Fork Implementation. According to the core developers, the fork will become effective on block number 7,280,000, which should occur on Feb 27th. When looking for opportunities...
Although this trade isn't quite ripe for me yet (I'm waiting for all time highs (circled), I thought I'd stick it out there in order to price the setup out, at least preliminarily. Naturally, the strike prices and/or expiries will have to be adjusted should a short opportunity come to pass ... . As with my TLT calendar (See Post Below), this trade operates on...
... for a 1.90/contract credit.
Max Profit: $190/contract
Max Loss/Buying Power Effect: Undefined/~$260 (on margin); full notional (cash secured)
Break Evens: 11.10/14.90
Notes: Implied volatility's still pretty high post-earnings at 42%, so taking a modestly bullish assumption shot with a position that emulates the delta...
The only underlying that interests me for an earnings announcement-related volatility contraction play this coming week is TWTR (62/67).
March 15th 28/38 Short Strangle (Pictured): 1.73 credit (.87 at 50% max), break evens at 26.27/39.73, -8.98 delta, 4.78 theta.
March 15th 25/28/38/41 Iron Condor: 1.01 credit (.50 at 50% max),...
Pictured here is a model and/or demo trade set up for purposes of showing a "continuously rolled" short straddle trade in SPY where the straddle is rolled out as a unit for duration/credit at 5-10% max to strikes that will result in a <+/- 30 delta setup, with the ideal being to roll from at-the-money to at-the-money. This type of trade can be used in any liquid...
We've got a bevvy of earnings announcements on tap:
AMD: Tuesday After Close
AAPL: Tuesday After Close
BABA: Wednesday Before Open
FB: Wednesday After Close
TSLA: Wednesday After Close
X: Wednesday After Close
AMZN: Thursday After Close
Out of these, AMD (73/74), TSLA (70/73), and X (79/58) have the best metrics for volatility contraction plays. ...
Decided to do something slightly different in Micron than an upward call diagonal (See Post Below) ... . Here's what's important about this trade:
Max Loss on Setup: $151/contract
Max Profit on Setup: Indeterminable
Front Month Value on Setup: $253 credit
Back Month Value on Setup: $404 debit
In a nutshell, it's a fairly delta neutral,...
Max Loss On Setup: $476/contract
Max Profit on Setup: $224/contract; $112 at 50% max with a Return on Capital of 23.5% at 50% max
Break Even Versus Spot: 35.76 versus 35.76
Debit Paid to Spread Width Ratio: 68%
Notes: A similar play to the BMY upward call diagonal (See Post Below), but without all the drama around earnings (which...
Max Loss On Setup: $443/contract
Max Profit On Setup: $307/contract; $153/contract at 50% max for 34.5% ROC
Break Even on Setup: 49.43 versus 50.18 spot
Debit Paid to Spread Width Ratio: 59.1%
Notes: With earnings on Thursday before market open and the underlying at the low end of its 52-week range, I'm looking at taking a...
(Pulling hair out). Ugh. A tough market temporarily for premium sellers. With VIX caving in dramatically off of its late December greater-than-35 highs, premium selling is the old gray mare that (temporarily) just ain't what it used to be.
That being said, there are a couple of potential earnings plays to be had next week: IBM (68/31; Tuesday after market...
... for a 1.92 per contract credit.
Max Loss on Setup: $308
Max Profit on Setup: $192
Notes: Another double diagonal, this time in the routinely high implied volatility XOP (currently 35.5%), a la the EEM double diagonal I put on earlier in the trading session. (See Post Below). I've gone shorter duration in the back month...
Not much is coming up on my screener this week for sexy premium selling beyond NFLX (66/60) (which has earnings on Thursday after market close) and petro (i.e., USO/OIH/XOP, with XOP being my usual go-to).
Pictured here is a March 15th 275/280/410/415 iron condor that pays a hair greater than the width of the wings (1.68). If you're not keen on going that far...
A week ago (1/3/19), I wrote a piece on RISK MANAGEMENT recommending purchasing a March Fence (aka a collar) for firms that are long ETH in their inventory. The trade was to buy the H $100 puts and sell the H $250 calls against it. When we sent out this report last week, the market for the fence was -8/8 (worth flat premium). Today, the market 0/16 (worth $8 -...