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Ussteel

OPENING: X FEB 22ND/APRIL 18TH 18/22.5 UPWARD CALL DIAGONAL... for a 3.09/contract debit. Metrics: Max Loss/Buying Power Effect on Setup: $309 Max Profit on Setup: $141 Break Even on Setup: 21.09 vs. 20.71 spot Debit Paid to Spread Width Ratio: 68.7 Delta: 37.91 Theta: .61 Notes: The front month short doesn't pay for all of the extrinsic in the back month long (which is generally why you want your break even to be at or below spot), but I'm somewhat fine with that given the debit paid to spread width ratio. On a side note: I'm getting into quite a bit of long delta here, so will have to look for opportunities to add short delta, either on a per instrument basis or via a broad market short delta setup ... .
NYSE:XLong
by NaughtyPines
TRADE IDEA: X FEB/APR 15/19 UPWARD CALL DIAGONALMetrics: Max Profit on Setup: $108 Max Loss/Buying Power Effect on Setup: $292 Break Even vs. Spot: 17.92 vs. 18.25 Debit Paid to Spread Width Ratio: 73% Delta: 30.35 Theta: .82 Notes: With high implied volatility rank/30-day implied (82/67) and fairly long-term weakness, putting on some bullish assumption here without hanging a ton of buying power out there if it goes south with the flexibility to work the setup long-term as a cost basis reduction play or synthetic covered call with the option to exercise the back month long if things go my way. Other Possible Plays: Short Strangle/Straddle: Earnings are 31 days out, so you may want to consider straight nondirectional premium selling closer to the announcement instead: the February 15th 16/21 short strangle is currently paying 1.39 with a 50% max metric of .69; the 18 short straddle in the same cycle: 3.26 with a 25% max metric of .82. Iron Condor/Fly: The February 15th 13/16/20/23 is paying 1.15 (greater than one-third the width of the wings); the 13/18/18/23 fly, 2.73 (greater than one-fourth the width of the longs). Short Put: If you're into "wheeling" (short put, acquire, cover), the February 18 short put is paying 1.50 in the February cycle a cost basis of 16.50 if assigned on the 18's, an 8.3% discount over current price.
NYSE:XLong
by NaughtyPines
THE WEEK AHEAD: AVGO EARNINGS; EWZ, GDX, XLooking 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 with a theta of 5.17 and a net delta of .67 with wide bid/ask showing in the off hours. Unfortunately, those 5-wides aren't available in the October monthly at the moment, so be mindful of the fact that you may experience difficulty or have to adjust on roll out if you have to since there aren't any 205's or 235's in the October yet. EWZ is still in a state of high anxiety with a 52-week rank in the 90's and the 30-day above 40%. The 72% probability of profit October 19th 28/38 short strangle camped out around the 20 delta is still paying over a buck (1.28), which is nice in a sub-$35 underlying. GDX (rank 44/30-day 26): Gold and silver have had the bejesus beaten out of them, so it's no surprise that the implied is relatively high here. Given the beat-down: October 19th 19 short straddle, 1.37 credit, 18.21 delta (bullish assumption). Alternatively, October 19th 19 short put (synthetic covered call), .87 credit, 59.74 delta. Lastly: another underlying that's gotten a smack-down -- X (earnings announced 31 days ago). The October 19th 27/33 neutral assumption short strangle is paying 1.06, but I could also see going plain Jane 30-delta short put (bullish assumption) -- the October 19th 28's paying .83; going 70 delta synthetic covered call -- the October 19th 32's paying 2.94; or going skewed short straddle -- the 40 delta October 19th 32 short straddle's paying 3.67, with the strategy selected matching the strength of your assumption ... .
NASDAQ:AVGO
by NaughtyPines
THE WEEK AHEAD: M EARNINGS, TWTR, X, EWZThe 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 strangle, 1.21 credit at the mid, break evens at 34.79/45.21. September 21st 35/46 short strangle, 1.60 credit at the mid, 33.40/47.60 break evens. (The reason why I'd go with this one over the August is that there isn't much time to manage the August setup if it goes awry). September 21st 40 short straddle, 5.42 credit at the mid, 34.58/45.42 break evens Other underlyings with earnings in the rear view/exchange-traded funds: TSLA (rank 61/30-day 66). I am unsure of whether I will touch this underlying any longer given private equity discussions. These can ruin an options trade if they go through, as well as ruin one if they don't. (See, RAD, like, more than once ... ). TWTR. The rank isn't great, but there is still some background implied to mine there (41.7%). The Sept 21st 29/36 short strangle is paying 1.06, which isn't shabby for a 32 clam underlying. X. With a 30-day at 41.4%, the September 21st 27/34's paying .87, the 30 short straddle, 3.06. EWZ. I've been short straddling this high implied exchange-traded fund, but the 30/38's paying .82 in the Sept cycle if you just can't stand the kind of skewing out the short straddle enjoys every other day with this one ... . Other Major Food Groups: TLT: Waiting for 122.50-ish for another bearish assumption setup.
NYSE:M
by NaughtyPines
2
THE WEEK AHEAD: TSLA, AAPL, BIDU, X EARNINGSAn interesting earnings announcement docket ahead this week: BIDU (rank 57/implied 39) announces Tuesday after market close; AAPL (rank 54/implied 26), Tuesday after market; TSLA (rank 87/implied 70), Wednesday after market; and X (rank 61/implied 53), Wednesday after market. Out of these, TSLA has the kind of volatility metrics I'm looking for in an earnings related volatility contraction play, but due to size of the underlying, it'll have to be defined risk, if anything. Because it can be a mover and its weekly expiry liquidity isn't great, my tendency would be to go out to the monthly since it's not all that far away in time and is likely to yield a fairer price fill. Preliminarily, the Aug 17th, 20 delta 250/260/337.5/347.5 is paying 3.07 at the mid, but I'd only want to play if I could get at least 1/3rd the width of the 10-wide or 3.33. For similar reasons, I'd use the August monthly with BIDU (weekly expiry liquidity): the Aug 17th 20-delta 225/235/277.5/287.5 is paying 3.03; go in a little tighter to the 23 delta, and you get paid 2.89 for the 7 1/2 wide 230/237.5/275/282.5. I'm frankly loathe to tighten these puppies up because as we've had a couple greater than one standard deviation movers this season (FB, TWTR), and no one (generally) likes to get whipped. In all likelihood, however, if I play anything, it'll be X, since I feel comfortable going naked on that underlying due to size and just generally prefer managing a broken naked over a broken defined: the Aug 17th 37 short straddle is paying 3.83 at the mid with a 25% take profit target of .96 and the Aug 17th 33.5/41.5 paying 1.17 with a 50% take profit of .59; that >1.00 for a twenty-ish delta short strangle is decent for a $37 underlying. AAPL just doesn't have the juice, with below 30% background implied ... . On the exchange traded front, it's more of the same ... . Volatility can be found in EWZ and XOP, but even then, it isn't as great as it was a few weeks ago: EWZ is 30.6%; XOP at 26.2%. Nevertheless, I'm maintaining positions in those as core premium selling positions for the time being, since XOP has had comparatively decent premium in it over time, and EWZ is going on a several week binge of greater than 30% implied. Major Food Group Trades: TLT has come off of 122.50 I've temporarily marked as the place to short from, so I'm waiting for a revisitation before re-upping. Gold has been absolutely hammered, but I'm unable to get into anything satisfactory in GLD; the upward call diagonal metrics always require me to pay more than 75% of the spread width, which makes a play unappealing. I'll look again this week, but have been repeatedly rebuffed. And, in spite of the little sell-off we had on Friday, broad market doesn't look all that sexy: SPY implied is at 12.2%, QQQ at 19%, IWM at 16.5% and EFA at 4.7% -- all well in the lower half of their 52-week ranges.
NYSE:X
by NaughtyPines
THE WEEK AHEAD: TSLA, RIG, X, EWZWith the vast majority of options-liquid earnings plays in the rear view mirror, premium selling becomes a search for just plain Jane high implied volatility underlyings. This week, TSLA, RIG, X round out out the top implied volatility single names; EWZ, the exchange-traded fund top implied volatility play. Here are some possible nondirectional setups, which are naturally preliminary ... . TSLA: The July 20th 225/330 short strangle is paying 10.15 with a 71% probability of profit metric and break evens at 214.85/340.15. Its defined risk counterpart, the 220/230/330/340 iron condor, is paying 2.66 at the mid with a probability of profit of 62% and break evens at 227.34/332.66. Ideally, I'd like to see a 70% probability of profit plus credit received greater than one-third the width of the wings, however, but would be hesitant to bring in the wings on this underlying, since it has a tendency to move big. RIG: The July 20th 14 short straddle is paying 1.87 with break evens at 12.13/15.87. Throw on a couple of cheap long wings to convert it into an iron fly -- the 11/14/14/17, and you bring in buying power reduction quite a bit over naked without giving up a huge amount of credit: it's paying 1.61 versus a max loss of 1.39 with break evens at 12.39/15.61. With iron flies, I like to see the setup pay at least 1/4 of the width of the longs (here, 6-wide), so this looks like a good, small buying power effect play. X: The July 20th 32/42 short strangle is paying 1.69 with a 69% probability of profit, break evens at 31.18/42.82. The corresponding 29/32/42/45 iron condor: .82 with break evens at 31.18/42.82. As with the Tesla play, I would like to see more out of the defined risk setup -- one-third the width of the wings in credit ... . EWZ: The July 20th 34/42 short strangle is paying 1.13 with a probability of profit of 69% and break evens at 32.87/43.13; the 31/34/42/45 iron condor, .75 with 33.25/42.75 break evens and a 66% probability of profit. Alternatively, the July 20th 33 short straddle is paying 3.88 with 34.12/41.88, with the corresponding 31/38/38/45 iron fly paying 3.50 with a 3.50 max loss metric and break evens of 34.50/41.50. As with the RIG iron fly, the cheap longs bring in buying power effect quite a bit over naked without giving up a ton in credit received ... .
NASDAQ:TSLA
by NaughtyPines
THE WEEK AHEAD: DIS, AKS, P, TSLA, TWTR, X, MU, DISHWith most of the earnings heavy hitters in the rear view mirror, there isn't much to trade this week of quality from an earnings announcement volatility contraction standpoint, with DIS being the standout name. DIS announces on Tuesday after market close with a 30-day implied volatility of 25%, which is in the upper half of its 52-week range. The May 18th 96/97 16 delta short strangle pays .97 with a 75% probably of profit, which isn't horrible, but I'd rather have a background implied above 50%. One underlying that I don't usually trade earnings that caught my eye, however, was DISH, with an implied of >50%, which is at the top end of its 52-week range. It announces earnings on Tuesday before market open. You can naturally play it for earnings-related vol contraction (the May 18th 20-delta 30.5/37.5 short strangle's paying .88), but the chart may suggest taking a directional shot instead. I'll set out several bullish assumption plays in a separate post that would take advantage of its "being on its butt-dom." On the slip side of the coin, there are several individual names that have that ~50% metric I'm looking for that have already announced and that may be worth nondirectional plays that are just as -- if not more productive -- than the Disney earnings play if set up in the June monthly. Here they are, ranked by their 30-day implied volatility percentages: AKS (65.5) (straddle), P (59.2) (straddle), TSLA (53.9) (strangle), TWTR (49.5) (strangle), X (48.6) (strangle), and MU (47) (strangle).* On the exchange-traded fund front, not much is attractive, having all fallen below 35% 30-day implied: XOP (29.3), EWZ (28.5), SMH (26.9), EWW (24.9), FXI (22.8), so I'm unlikely to consider putting on a play in one of those unless something substantially changes as the week evolves. Moreover, my tendency is to set those up in the monthlies nearest 45 days until expiration and June (40 days 'til) is starting to "fall out of that window," with July (75 days 'til) being too far out in time. * -- You can naturally consider going defined risk with some of these, using iron flies instead of naked short straddles; iron condors instead of short strangles.
NYSE:DIS
by NaughtyPines
2
THE WEEK AHEAD: TWTR, X, IYR, XLU, ORCL, IBMAlthough there are quite a few earnings coming up next week, only two catch my eye from a premium selling standpoint: Twitter and U.S. Steel. Twitter announces on Wednesday before market open; has a 30-day implied volatility of 75.19%; and the May 4th 20-delta, 74% probability of profit 27.5/38 short strangle is paying 1.28 at the mid with its defined risk counterpart, the 24/27.5/38/41 iron condor paying .87. US Steel (which can be a mover; 30-day implied 59.6%) announces on Wednesday after market close; and the May 4th 20-delta, 72% probability of profit 33/41 is paying 1.07 with its defined risk counterpart, the 30/33/41/44, paying .69. On the exchange-traded fund front, nothing looks particularly enticing at the moment. OIH and XOP round out the top of the pile volatility-wise, but their 30-days are sub-35, with other funds trailing off from there, so I'm looking at potentially putting on a couple of directional plays in single names where earnings are in the rear view mirror -- ORCL and IBM and/or in exchange-traded funds where concerns over rising interest rates and/or comparative yield have beaten them down, temporarily or otherwise -- IYR and XLU. I'll set out those ideas in a separate post, since there are multiple ways in which you can go directional with an options setup in those without hanging up a lot of buying power in actual shares. Additionally, sometimes it can be worth comparing and contrasting various "options options" so that you can decide which strategy suits your preference as to how much you want to devote to the trade ... .
NYSE:TWTR
by NaughtyPines
THE WEEK AHEAD: FRENCH ELECTIONS AND THE VIX; AA, X, and UAWith the French primaries in the rear view mirror and some market unease abated due to the result, VIX futures are caving hard as of the writing of this post (the May contract is down 8% to 13.15). This, unfortunately, changes the potential complexion of next week's market for me, since it is likely that implied volatility will dry up somewhat in SPY/SPX and RUT/IWM, making selling premium in them less productive than it would have been at Friday close. Oh, well. You take what the market gives you ... . With earnings season in full swing, we've got a lot of stuff announcing next week, but not everything is playable or worthwhile from a premium selling standpoint. Right now, I'm focused on three underlyings which have something approaching the right metrics I'm looking for in these plays (>70 implied volatility rank/>50 implied volatility): AA, which announces on Monday after market close; X, which announces Tuesday after market; and UA, which announces Thursday before market. As we get closer to those announcements (and I've got live market data to work with), I'll post setups for those if they look good enough for plays from a dollar and cents and liquidity standpoint. Last time I looked at a AA setup, for example, I wasn't happy with what I saw for a bid/ask in the expiry I wanted to use for the play ... . With exchange traded funds, nothing is looking particularly "sexy" here, and it's likely to look even less sexy at NY open, since a low VIX invariably permeates the entire market. That being said, XOP does approach my metrics for a play, although I'm already in a put diagonal that will require some attention and may lead me to beg off putting on some more, since I don't want to have a new setup get in the way of any rolls I need to do.
TVC:VIX
by NaughtyPines
X EARNINGS SHORT STRANGLE/IRON FLYX announces earnings tomorrow (Tuesday) after market close, and with its implied volatility rank and implied volatility metrics, it's ripe for a volatility contraction play. Here are two possible setups, which naturally might need to be tweaked this way or that depending on price movement intraday tomorrow. Feb 17th 29/38 Short Strangle Metrics Probability of Profit: 68% Max Profit: $130/contract Buying Power Effect/Max Loss: Broker Dependent/Undefined Break Evens: 27.70/39.30 Notes: (1) Here, as is my habit, I'm selling the 20 delta call and put. (2) I went out a little bit farther in time to the monthly, since things are generally more liquid there, so I would be more likely to get a fill at the mid without too much diddling around. (3) Look to manage at 50% max profit or about $65/contract. Feb 17th 25.5/33/33/41 Iron Fly Metrics: Probability of Profit: 50% Max Profit: $392/contract Max Loss/Buying Power Effect: $408/contract Break Evens: 29.08/36.92 Notes: (1) The first thing I did was check to see what a three-wide iron condor would pay with the short options at the 20 delta strikes. It was less than 1/3rd the width of the strikes, so I switched to putzing with a fly. (2) Look to manage this setup at 25% max profit (~$98/contract). (3) While the setup looks "sexier" from a max profit standpoint, you'll also notice that the profit zone is narrower than that of the short strangle. Nevertheless, is defined risk going in, so I know what my max loss is if the thing blows up in my face.
NYSE:X
by NaughtyPines
3