THE WEEK AHEAD: ANF, BBY EARNINGS; XOP, EWZ, GDX, SMH
It's a short market week here, but this is what we've got ... .
EARNINGS:
HPE (43/33): Announces Monday after market close.
ANF (85/80): Announces Tuesday before market open.
BBY (70/42): Announces Tuesday before market open.
HPQ (50/36): Announces Tuesday after market close
DE (34/29): Announces Wednesday before market open.
Of these, ANF and BBY appear most appealing from a volatility contract standpoint.
The setup pictured here is an ANF 16 short straddle in the December 20th month, paying 2.87 (.72 at 25% max) versus 15.93 spot (18.0%), with the defined risk 11/16/16/21 iron fly paying 2.60 with a buying power effect of 2.40 (.65 at 25% max).
The BBY December 20th 65/80 short strangle is paying 1.75 (.88 at 50% max), with the correspondent 60/65/80/85 iron condor in the same cycle paying 1.60 (.80 at 50% max).
EXCHANGE-TRADED FUNDS:
TLT (36/12)
SLV (29/20)
GLD (23/11)
USO (21/33)
XLE (19/20)
As with last week, short duration premium selling remains less than ideal here, so either hand sit, keeping powder dry, or look to deploy in longer duration setups. Here's what's on my list for longer duration setups in which at background implied volatility is higher:
XOP: January, where the at-the-money short straddle is paying 2.20 versus 21.05 spot (10.5%)
EWZ: March, where the at-the-money short straddle is paying 5.12 versus 43.16 spot (11.9%)
GDX: March, where the at-the-money short straddle is paying 3.14 versus 26.76 spot (11.7%)
SMH: May, where the at-the-money short straddle is paying 17.95 versus 130.92 spot (13.7%)
BROAD MARKET:
SPY 10/13
IWM (7/16)
QQQ (7/16)
As with the exchange-traded funds, you're looking at either hand sitting on shorter duration setups or going out farther in time to get paid, with the expiries in which the at-the-money short straddle is paying greater than 10% in September for SPY and June for both IWM and QQQ (ugh).
FUTURES:
/6B (67/12)
/NG (41/60)
/6C (30/5)
/SI (29/18)
/GC (23/11)
Cable I get, but what's with the Loonie?
VIX/VIX DERIVATIVES:
With the January, February, and March contracts trading at 16.68, 17.76, and 18.05 respectively as of Friday close, VIX term structure trades in those expiries remain viable. For all other short volatility trades, I'd wait for a VIX pop above 20 to consider starting to add short position, as well as consider taking off some risk if we see another drop back into the 2019 lows at 12. It finished Friday at 12.34 ... .
EARNINGS:
HPE (43/33): Announces Monday after market close.
ANF (85/80): Announces Tuesday before market open.
BBY (70/42): Announces Tuesday before market open.
HPQ (50/36): Announces Tuesday after market close
DE (34/29): Announces Wednesday before market open.
Of these, ANF and BBY appear most appealing from a volatility contract standpoint.
The setup pictured here is an ANF 16 short straddle in the December 20th month, paying 2.87 (.72 at 25% max) versus 15.93 spot (18.0%), with the defined risk 11/16/16/21 iron fly paying 2.60 with a buying power effect of 2.40 (.65 at 25% max).
The BBY December 20th 65/80 short strangle is paying 1.75 (.88 at 50% max), with the correspondent 60/65/80/85 iron condor in the same cycle paying 1.60 (.80 at 50% max).
EXCHANGE-TRADED FUNDS:
TLT (36/12)
SLV (29/20)
GLD (23/11)
USO (21/33)
XLE (19/20)
As with last week, short duration premium selling remains less than ideal here, so either hand sit, keeping powder dry, or look to deploy in longer duration setups. Here's what's on my list for longer duration setups in which at background implied volatility is higher:
XOP: January, where the at-the-money short straddle is paying 2.20 versus 21.05 spot (10.5%)
EWZ: March, where the at-the-money short straddle is paying 5.12 versus 43.16 spot (11.9%)
GDX: March, where the at-the-money short straddle is paying 3.14 versus 26.76 spot (11.7%)
SMH: May, where the at-the-money short straddle is paying 17.95 versus 130.92 spot (13.7%)
BROAD MARKET:
SPY 10/13
IWM (7/16)
QQQ (7/16)
As with the exchange-traded funds, you're looking at either hand sitting on shorter duration setups or going out farther in time to get paid, with the expiries in which the at-the-money short straddle is paying greater than 10% in September for SPY and June for both IWM and QQQ (ugh).
FUTURES:
/6B (67/12)
/NG (41/60)
/6C (30/5)
/SI (29/18)
/GC (23/11)
Cable I get, but what's with the Loonie?
VIX/VIX DERIVATIVES:
With the January, February, and March contracts trading at 16.68, 17.76, and 18.05 respectively as of Friday close, VIX term structure trades in those expiries remain viable. For all other short volatility trades, I'd wait for a VIX pop above 20 to consider starting to add short position, as well as consider taking off some risk if we see another drop back into the 2019 lows at 12. It finished Friday at 12.34 ... .