THE WEEK AHEAD: BBY, DE, GPS, LOW EARNINGS; UNG, XOP, NFLX
In spite of the shortened trading week due to the Thanksgiving holiday, there are balls to hit out there ... .
Earnings:
BBY (95/57) (announcing Tuesday before market open): The December 21st 57.5/75 short strangle shown here is paying 2.42 with break evens near the one standard deviation line. I tried pricing out a defined risk iron condor, but it looks like some strikes need to populate post-November opex in order for me to price a setup where I'd want to set up my tent (i.e., short strikes between the 20 and 30 deltas, longs 3-5 strikes out with the setup paying at least one-third the width of the wings).
LOW (78/40) (announcing Tuesday before market open): As with the DE play, I'm able to price out a short strangle -- the 80% probability of profit December 21st 80/105 pays 1.35, but not an iron condor due to the population of strikes around where I'd like to set up. I'll just have to wait until NY open to price a defined risk setup.
GPS (87/54) (announcing Tuesday after market close): To me, it's small enough to short straddle, with the December 21st 26 short straddle paying 3.17, but I could also see going with the 23/29 (paying 1.05) to give yourself a little more flexibility with defense if you're not a fan of defending the straddle via inversion (which is generally what you have to do with a short straddle where the move is greater than the expected). Alternatively, the December 21st 21/26/26/31 iron fly pays 2.71 with a buying power effect of 2.29, which are the metrics I'm looking for out of an iron fly (risk one to make one or better; credit received at least one-fourth the number of strikes between the longs).
DE (81/48) (announcing Wednesday before market open): The December 21st 135/160 is paying 4.53 with near one standard deviation break evens; the 130/135/160/165 iron condor in the same expiry pays 1.75.
Non-Earnings Single Name:
NFLX (69/54) still has some juice in it post-earnings. The December 21st 240/245/325/330 is paying 1.56 -- not quite one-third the width, but you're only working with 33 days until expiry.
Exchange-Traded Funds:
The top symbols: SLV (100/24), UNG (100/97), EEM (63/27), OIH (77/41), and XOP (77/42). Unless you've been living under a rock, UNG, OIH, and XOP "friskiness" are understandable here, with oil prices taking a header from more than $75/bbl. to a low $20 below that since the beginning of October. Conversely, a fire got lit under natty's ass due to seasonally early weather-related pressure, shooting up from a less than a 3.50 print at the start of November to 4.93 mid-month. It's eased back to 4.39 since then, but yeesh ... . Were it not natural gas, I'd be inclined to sell premium in UNG given the rank/implied metrics, but I'm patiently waiting for my standard seasonality play -- a downward put diagonal with the front month in Jan, the back month mid year. Since we're only in November with plenty of winter in front of us, I'm satisfied with waiting on more potential upside before pulling the trigger on that setup.
With XOP and related products, I've been selling nondirectional premium, although I could see potentially skewing things bullishly, adding some petro underlying long delta to existing setups, or just taking an outright bullish assumption shot (e.g., /CL short puts, XOP/OIH/XLE short puts, upward call diagonals, etc.), since oil has been totally crushed here.
Majors:
SPY (31/21); QQQ (53/25); IWM (54/23); DIA (37/19). Temporarily, it looks like QQQ is where the broad market premium is at, followed by IWM.
Earnings:
BBY (95/57) (announcing Tuesday before market open): The December 21st 57.5/75 short strangle shown here is paying 2.42 with break evens near the one standard deviation line. I tried pricing out a defined risk iron condor, but it looks like some strikes need to populate post-November opex in order for me to price a setup where I'd want to set up my tent (i.e., short strikes between the 20 and 30 deltas, longs 3-5 strikes out with the setup paying at least one-third the width of the wings).
LOW (78/40) (announcing Tuesday before market open): As with the DE play, I'm able to price out a short strangle -- the 80% probability of profit December 21st 80/105 pays 1.35, but not an iron condor due to the population of strikes around where I'd like to set up. I'll just have to wait until NY open to price a defined risk setup.
GPS (87/54) (announcing Tuesday after market close): To me, it's small enough to short straddle, with the December 21st 26 short straddle paying 3.17, but I could also see going with the 23/29 (paying 1.05) to give yourself a little more flexibility with defense if you're not a fan of defending the straddle via inversion (which is generally what you have to do with a short straddle where the move is greater than the expected). Alternatively, the December 21st 21/26/26/31 iron fly pays 2.71 with a buying power effect of 2.29, which are the metrics I'm looking for out of an iron fly (risk one to make one or better; credit received at least one-fourth the number of strikes between the longs).
DE (81/48) (announcing Wednesday before market open): The December 21st 135/160 is paying 4.53 with near one standard deviation break evens; the 130/135/160/165 iron condor in the same expiry pays 1.75.
Non-Earnings Single Name:
NFLX (69/54) still has some juice in it post-earnings. The December 21st 240/245/325/330 is paying 1.56 -- not quite one-third the width, but you're only working with 33 days until expiry.
Exchange-Traded Funds:
The top symbols: SLV (100/24), UNG (100/97), EEM (63/27), OIH (77/41), and XOP (77/42). Unless you've been living under a rock, UNG, OIH, and XOP "friskiness" are understandable here, with oil prices taking a header from more than $75/bbl. to a low $20 below that since the beginning of October. Conversely, a fire got lit under natty's ass due to seasonally early weather-related pressure, shooting up from a less than a 3.50 print at the start of November to 4.93 mid-month. It's eased back to 4.39 since then, but yeesh ... . Were it not natural gas, I'd be inclined to sell premium in UNG given the rank/implied metrics, but I'm patiently waiting for my standard seasonality play -- a downward put diagonal with the front month in Jan, the back month mid year. Since we're only in November with plenty of winter in front of us, I'm satisfied with waiting on more potential upside before pulling the trigger on that setup.
With XOP and related products, I've been selling nondirectional premium, although I could see potentially skewing things bullishly, adding some petro underlying long delta to existing setups, or just taking an outright bullish assumption shot (e.g., /CL short puts, XOP/OIH/XLE short puts, upward call diagonals, etc.), since oil has been totally crushed here.
Majors:
SPY (31/21); QQQ (53/25); IWM (54/23); DIA (37/19). Temporarily, it looks like QQQ is where the broad market premium is at, followed by IWM.