THE WEEK AHEAD: (WHAT'S LEFT OF IT) -- XLK, QQQ SETUPSWith this holiday foreshortened trading week, premium selling pickings remain slim. The vast majority of underlyings with 52-week >70 implied volatility rank are in stocks that are ramping up for earnings -- e.g., QCOM (71) with earnings in 15, MSFT (79) (16 days), AAPL (75) (21). In that case, you might as well wait to look at those closer to announcement to see whether they are worth a play, rather than diving in here and falling victim to volatility expansion.
On the non-earnings front, two broad sector or index exchange-traded funds stick out -- XLK and QQQ, with the former having a 52-week implied volatility rank of 67 and background implied volatility of 19; the latter, rank -- 65, background -- 20.
Possible XLK Setups
Aug 18th 52/57 short strangle
Max Profit: $106 at the mid
Max Loss/Buying Power Effect: Undefined
Break Evens: ~ 1 SD, both sides
Theta: 1.99
Delta: 7.87
Aug 18th 54 short straddle
Max Profit: $281 at the mid
Max Loss/Buying Power Effect: Undefined
Break Evens: Between expected and 1 SD put side, at expected call side
Theta: 2.79
Delta: -10.71
Aug 18th 50/54/55/58 "near" iron fly
Max Profit: $203 at the mid
Max Loss/Buying Power Effect: $197
Break Evens: ~ Expected, both sides
Theta: 1.35
Delta: -3.45
Notes: I excluded the 20 delta iron condor because it just didn't look "worth it." The "near" iron fly I widened to put a strike between the put and call sides to get break evens around the expected move.
Possible QQQ Setups
Aug 18th 126/129/142/144 iron condor
Max Profit: $86 at the mid
Max Loss/Buying Power Effect: $214
Break Evens: Between expected and 1 SD put side, expected on call side
Theta: 1.22
Delta: -1.72
Aug 18th 129/142 short strangle
Max Profit: $219
Max Loss/Buying Power Effect: Undefined
Break Evens: 1 SD put side, between expected and 1 SD, call
Theta: 5.57
Delta: .70
