NaughtyPines

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 3.22 debit. Max Profit: $78/contract Max Loss/Buying Power Effect: $322 per contract Break Even/Cost Basis: 3.22/share Notes: A speculative shot on a high implied volatility biotech underlying ... .

for a 1.23/contract credit. Metrics: Max Profit: $123/contract Max Loss/Buying Power Effect: $277/contract Break Evens: 168.77/193.61 Delta: -4.36 Theta: 1.30 Notes: Going out to the November monthly to sell some premium in the highest implied volatility broad market instrument out of IWM, SPY, and QQQ. Collecting a dime short of one-third the width of the ...

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 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 ... .

... 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) ...

Earnings: ORCL: Announces Thursday after market. Rank/IV: 74/31. Sept 21st 68% Probability of Profit 20 delta 45/50.5 short strangle: .79 credit. KR: Announces Thursday before market. Rank/IV: 54/37. Sept 21st 72% Probability of Profit 20 delta 30/35 short strangles: .60 credit. Non-Earnings: EWZ: Rank/IV: 97/48 TSLA: Rank/IV: 95/57 GDX: Rank/IV: 68/30 USO: ...

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 ...

... 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.

... 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.

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 1.34/contract credit. Max Profit: $134/contract Max Loss: $266/contract Break Evens: 172.66/188.67 Delta: -5.37 Theta: 1.83 Notes: A slight variation on a delta-based setup to accommodate skew. Instead of selling equally valued delta on both the put and call sides, I'm selling strikes that are equidistant from current price, but doubling up a narrower ...

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 ...

... 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.

... 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 ...

... for a 3.05/contract credit. Metrics: Max Profit: $305/contract Max Loss: Undefined: $848/contract on margin Break Evens: 38.95/45.05 Delta: -6.55 Theta: 3.31 Notes: Admittedly, the implied volatility rank and implied volatility metrics here aren't great (11 and 25, respectively) but the credit collected as a function of the buying power effect is decent ...

HTZ puts the pedal to the metal on Monday after market close and is at the 52% mark of its 52-week range and has a 30-day implied of 75%. Due to its size, I'd probably only go short straddle: the Aug 17th 16 short straddle is paying 2.28 with a 25% take profit of .57. YELP shout outs its earnings on Wednesday (8/8) after market close (rank 66/30-day implied ...