THE WEEK AHEAD: AMD, AAPL, BABA, FB, TSLA, X, AMZN
We've got a bevvy of earnings announcements on tap:
AMD: Tuesday After Close
AAPL: Tuesday After Close
BABA: Wednesday Before Open
FB: Wednesday After Close
TSLA: Wednesday After Close
X: Wednesday After Close
AMZN: Thursday After Close
Out of these, AMD (73/74), TSLA (70/73), and X (79/58) have the best metrics for volatility contraction plays. Preliminarily:
AMD March 15th 18/26 Short Strangle, 69% Probability of Profit, 1.39 credit, break evens at 16.61/27.39, delta -13.69, theta 3.23, 50% max of .69.
AMD Feb 15th 18/25 Short Strangle, 72% Probability of Profit, 1.01 credit, break evens at 16.99/26.01, delta -18.76, theta 5.75, 50% max of .50.
AMD Feb 15th 22.5/23 Quasi-Short Straddle, 59% Probability of Profit, 3.27 credit, break evens at 19.23/26.27, delta .07, theta 8.26, 25% max of .82.
AMD Feb 15th 16.5/22.5/23/29 Quasi-Iron Fly, 55% Probability of Profit, 2.97 credit, break evens at 19.53/25.97, delta 3.61, theta 5.32, 25% max of .74.
Notes: I've shown both the 19 Day Short Strangle next to the 46 day'er in the March cycle just to show that you don't get a huge bang for your buck by going farther out in time when shooting for a 70% or so Probability of Profit with your short strangles. .38/$38 is nothing to frown at, but I like to do these as "quickee dirtees," taking advantage of any post-announcement volatility crush and then getting out and moving on, so would lean toward the shorter duration February cycle trade.
I've also shown an almost short straddle and a quasi-iron fly for those who like to start out more delta neutral.
TSLA Feb 15th 240/250/340/350 Iron Condor, 63% Probability of Profit, 3.25 credit, break evens at 246.75/343.25, delta -1.18, theta 10.86, 50% max of 1.62.
Notes: I would shoot for a fill that is at least one-third the width of the wings or 3.33. Markets can be pesky wide in TSLA, and you don't want to start out underwater by virtue of the spread, so being patient, doing a little price discovery on the front end of things, and attempting to get filled above the mid is to your advantage ... . If the market won't come to you, pass on the play.
X Feb 15th 21.5 Short Straddle, 56% Probability of Profit, 2.44 credit, break evens at 19.06/23.94, delta 4.02, theta 5.78, 25% max of .61.
X Feb 15th 17.5/21.5/21.5/25.5 Iron Fly, 50% Probability of Profit, 2.10 credit, break evens at 19.40/23.60, delta -7.99, theta, 2.97, 25% max of .52.
Notes: I looked at a short strangle with a 70% Probability of Profit metric, by the credit received didn't seem very compelling (<1.00).
On the exchange-traded fund front, not much is hopping with the top five coming in under 50 in rank, under 35 in 30-day implied or both: IWM (59/21), DIA (52/18), XLV (48/18), SPY (47/17), and XHB (45/23), although implied remains fairly high in (where else?) oil, with OVX at 35.21, USO at 68/36, OIH at 44/33, and XOP at 36/32,
AMD: Tuesday After Close
AAPL: Tuesday After Close
BABA: Wednesday Before Open
FB: Wednesday After Close
TSLA: Wednesday After Close
X: Wednesday After Close
AMZN: Thursday After Close
Out of these, AMD (73/74), TSLA (70/73), and X (79/58) have the best metrics for volatility contraction plays. Preliminarily:
AMD March 15th 18/26 Short Strangle, 69% Probability of Profit, 1.39 credit, break evens at 16.61/27.39, delta -13.69, theta 3.23, 50% max of .69.
AMD Feb 15th 18/25 Short Strangle, 72% Probability of Profit, 1.01 credit, break evens at 16.99/26.01, delta -18.76, theta 5.75, 50% max of .50.
AMD Feb 15th 22.5/23 Quasi-Short Straddle, 59% Probability of Profit, 3.27 credit, break evens at 19.23/26.27, delta .07, theta 8.26, 25% max of .82.
AMD Feb 15th 16.5/22.5/23/29 Quasi-Iron Fly, 55% Probability of Profit, 2.97 credit, break evens at 19.53/25.97, delta 3.61, theta 5.32, 25% max of .74.
Notes: I've shown both the 19 Day Short Strangle next to the 46 day'er in the March cycle just to show that you don't get a huge bang for your buck by going farther out in time when shooting for a 70% or so Probability of Profit with your short strangles. .38/$38 is nothing to frown at, but I like to do these as "quickee dirtees," taking advantage of any post-announcement volatility crush and then getting out and moving on, so would lean toward the shorter duration February cycle trade.
I've also shown an almost short straddle and a quasi-iron fly for those who like to start out more delta neutral.
TSLA Feb 15th 240/250/340/350 Iron Condor, 63% Probability of Profit, 3.25 credit, break evens at 246.75/343.25, delta -1.18, theta 10.86, 50% max of 1.62.
Notes: I would shoot for a fill that is at least one-third the width of the wings or 3.33. Markets can be pesky wide in TSLA, and you don't want to start out underwater by virtue of the spread, so being patient, doing a little price discovery on the front end of things, and attempting to get filled above the mid is to your advantage ... . If the market won't come to you, pass on the play.
X Feb 15th 21.5 Short Straddle, 56% Probability of Profit, 2.44 credit, break evens at 19.06/23.94, delta 4.02, theta 5.78, 25% max of .61.
X Feb 15th 17.5/21.5/21.5/25.5 Iron Fly, 50% Probability of Profit, 2.10 credit, break evens at 19.40/23.60, delta -7.99, theta, 2.97, 25% max of .52.
Notes: I looked at a short strangle with a 70% Probability of Profit metric, by the credit received didn't seem very compelling (<1.00).
On the exchange-traded fund front, not much is hopping with the top five coming in under 50 in rank, under 35 in 30-day implied or both: IWM (59/21), DIA (52/18), XLV (48/18), SPY (47/17), and XHB (45/23), although implied remains fairly high in (where else?) oil, with OVX at 35.21, USO at 68/36, OIH at 44/33, and XOP at 36/32,