THE WEEK AHEAD: CCL, XLU, XLE, SMH, TQQQ, /CL
EARNINGS:
CCL (67/284) (What?! 284% 30-day) announces earnings this coming week. Unless you've been under a rock the past several weeks, you'll know how hard it's been hammered with COVID-19 and can easily anticipate further hammering, both with earnings, forward guidance, and the potential reduction of its 2.00 annual dividend (12.86% yield as of Friday close). They have yet to announce a dividend cut, but cruise lines are also not part of the $2 trillion bailout package, so there is probably more pain ahead in the short to medium term, and a potential suspension or reduction the dividend payment will only add fuel to the fire. For those looking to bet on an eventual recovery, however, the May 17th 10 short put is paying 2.30 at the mid price as of Friday close with a resulting cost basis of 7.70 if assigned, a 53% discount over where the stock is currently trading.
EXCHANGE-TRADED FUNDS ORDERED BY RANK
XLU (67/57)
XLE (67/99)
SMH (67/72)
USO (67/161)
EWW (59/86)
EWZ (59/95)
GDXJ (59/1O2)
GLD (58/35)
XOP (49/115)
SLV (48/63)
FXI (44/49)
GDX (41/78)
TLT (34/28)
BROAD MARKET EXCHANGE-TRADED FUNDS ORDERED BY RANK
TQQQ (80/175)
DIA (78/76)
IWM (76/72)
SPY (71/65)
QQQ (71/55)
EEM (73/61)
EFA (53/50)
FUTURES ORDERED BY RANK
/NQ (74/72)
/ES (71/66)
/CL (58/34)
/GC (58/34)
/SI (48/60)
/ZS (45/23)
/ZW (36/36)
/ZC (22/34)
VIX/VIX DERIVATIVES
VIX finished the week at 65.54 with the /VX futures term structure in backwardation.
MUSINGS
On Margin:
Truth be told, I'm not doing a ton here besides either (a) waiting for assignment; or (b) making adjustments where doing so doesn't subject me to "call side whip" such that my put side headaches become call-side ones. And although the high volatility environment is great for premium selling, it does have one minor, pesky side effect that I may have mentioned before -- options liquidity hasn't been all that great, even in what are usually the most liquid underlyings. Additionally, I generally like to be managing the smallest number of crap piles at once as possible, and this closely correlated sell-off has resulted in a few that I'd like to clean up before potentially inheriting more. To a certain extent, one has to be fine with that; it is, after all, the challenging trades that make your life interesting.
The IRA:
As usual, the IRA's a patience game. Having stuck short puts out there in things on my shopping list (HYG, XLU, IYR, and EFA), the only thing to do here is wait until expiry, at which point I'll be assigned shares or the short puts will expire worthless.
On the other end of the stick, I'm looking to dump pieces of my low-yielding TLT at or near all-time-highs and substantially up from my cost basis in those shares at or below 110, which is the last time I acquired shares. Unfortunately, I have been less than religious about keeping tracking of my cost basis of shares in the IRA, since the basic setup was that these were intended to generally be "never exit" or "never get called away" plays. However, I think U.S. treasuries have had a fairly good run, and there are probably better places to stick that capital.
The /CL Chart:
I've thrown up a monthly USOIL chart here to show how current prices in oil could be a multi-month, if not multi-year opportunity here to take a bullish assumption position in either /CL directly, USO, or one of the beaten-down oil exchange-traded fund sector exchange-traded funds (XOP, OIH, or XLE). With /CL implied/rank at 67/165, I've done some of that already with /CL out-of-the-money short puts, (See Posts Below), but this can also be done in USO more incrementally, since it's a much smaller instrument and has the added advantage of having .03 wide markets here. Alternatively, there is also the USO Zebra/Call Ratio Spread, about which I'll post separately ... .
CCL (67/284) (What?! 284% 30-day) announces earnings this coming week. Unless you've been under a rock the past several weeks, you'll know how hard it's been hammered with COVID-19 and can easily anticipate further hammering, both with earnings, forward guidance, and the potential reduction of its 2.00 annual dividend (12.86% yield as of Friday close). They have yet to announce a dividend cut, but cruise lines are also not part of the $2 trillion bailout package, so there is probably more pain ahead in the short to medium term, and a potential suspension or reduction the dividend payment will only add fuel to the fire. For those looking to bet on an eventual recovery, however, the May 17th 10 short put is paying 2.30 at the mid price as of Friday close with a resulting cost basis of 7.70 if assigned, a 53% discount over where the stock is currently trading.
EXCHANGE-TRADED FUNDS ORDERED BY RANK
XLU (67/57)
XLE (67/99)
SMH (67/72)
USO (67/161)
EWW (59/86)
EWZ (59/95)
GDXJ (59/1O2)
GLD (58/35)
XOP (49/115)
SLV (48/63)
FXI (44/49)
GDX (41/78)
TLT (34/28)
BROAD MARKET EXCHANGE-TRADED FUNDS ORDERED BY RANK
TQQQ (80/175)
DIA (78/76)
IWM (76/72)
SPY (71/65)
QQQ (71/55)
EEM (73/61)
EFA (53/50)
FUTURES ORDERED BY RANK
/NQ (74/72)
/ES (71/66)
/CL (58/34)
/GC (58/34)
/SI (48/60)
/ZS (45/23)
/ZW (36/36)
/ZC (22/34)
VIX/VIX DERIVATIVES
VIX finished the week at 65.54 with the /VX futures term structure in backwardation.
MUSINGS
On Margin:
Truth be told, I'm not doing a ton here besides either (a) waiting for assignment; or (b) making adjustments where doing so doesn't subject me to "call side whip" such that my put side headaches become call-side ones. And although the high volatility environment is great for premium selling, it does have one minor, pesky side effect that I may have mentioned before -- options liquidity hasn't been all that great, even in what are usually the most liquid underlyings. Additionally, I generally like to be managing the smallest number of crap piles at once as possible, and this closely correlated sell-off has resulted in a few that I'd like to clean up before potentially inheriting more. To a certain extent, one has to be fine with that; it is, after all, the challenging trades that make your life interesting.
The IRA:
As usual, the IRA's a patience game. Having stuck short puts out there in things on my shopping list (HYG, XLU, IYR, and EFA), the only thing to do here is wait until expiry, at which point I'll be assigned shares or the short puts will expire worthless.
On the other end of the stick, I'm looking to dump pieces of my low-yielding TLT at or near all-time-highs and substantially up from my cost basis in those shares at or below 110, which is the last time I acquired shares. Unfortunately, I have been less than religious about keeping tracking of my cost basis of shares in the IRA, since the basic setup was that these were intended to generally be "never exit" or "never get called away" plays. However, I think U.S. treasuries have had a fairly good run, and there are probably better places to stick that capital.
The /CL Chart:
I've thrown up a monthly USOIL chart here to show how current prices in oil could be a multi-month, if not multi-year opportunity here to take a bullish assumption position in either /CL directly, USO, or one of the beaten-down oil exchange-traded fund sector exchange-traded funds (XOP, OIH, or XLE). With /CL implied/rank at 67/165, I've done some of that already with /CL out-of-the-money short puts, (See Posts Below), but this can also be done in USO more incrementally, since it's a much smaller instrument and has the added advantage of having .03 wide markets here. Alternatively, there is also the USO Zebra/Call Ratio Spread, about which I'll post separately ... .
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