The Week Ahead: ARKK, KRE, GDXJ; CFLT, COIN, DASH Earnings
With broad market implied volatility having crushed out mightily over the past couple of weeks, I'm left scrounging around in the exchange-traded fund and/or (ugh) single name space for premium. There aren't a lot of underlyings with ideal IVR/IV metrics to play, but there are a few things that still have decent IV in them, even if it isn't toward the top of its 52-week range.
There isn't anything in the exchange-traded fund space as of Friday close with an IVR >50%, but there are a few with 30-day IV >35% (which is the combination of metrics I like to see). Here there are, ranked by 30-day with stuff <$20/share weekend weeded out:
ARKK 41
KRE 41
KWEB 39
GDXJ 37
USO 36
XOP 35
Pictured here is a fairly plain Jane delta neutral short strangle in ARKK in the June expiry with the short legs camped out around the 16 delta, paying 1.00 at the mid price with break evens at 30 and 43.
The KRE June 16th 37/48 short strangle (16 delta) is paying around 1.25.
The KWEB June 16th 28 short straddle is paying around 1.95. (Going 16 delta short strangle didn't end up paying much; the 26/30.5 was paying .55).
The GDXJ June 16th 35/46 short strangle (17 delta) is paying 1.04 at the mid.
The USO June 16th 60.76 short strangle (17 delta) is paying 1.65 at the mid.
The XOP June 16th 112/143 short strangle (17 delta) is paying 3.04 at the mid.
Broad Market
Ugh. Why even go here ... . Broad market exchange-traded funds, ranked by 30-day IV:
IWM 21.3%
QQQ 20.6%
EFA 16.2%
SPY 16.1%
DIA 14.3%
Bond Funds
My only observation here is to note that TLT premium is better than SPY's (as is EMB's).
EMB 20.9%
TLT 17.0%
HYG 9.5%
AGG 7.4%
And, of course, there are earnings ... . I've screened and ranked these by >50% 30-day IV, as well as for options liquidity and thrown out underlyings that are trading at <$20/share:
COIN 111.2 (Thursday after market close)
W 107
RUN 92.9
CFLT 80.9 (Wednesday after market close)
PPL 73.4 (Thursday before market open)
FOUR 72.0
DASH 70.2 (Thursday after market close)
The drawbacks to W, RUN, and FOUR involve strike to strike granularity, which is why I haven't bothered to look up their announcement days and times. W and RUN have 1 1/2 wides; FOUR, has 5-wides. Not having 1-wides can not only make setting up delta neutral a pain; it can making rolling out a pain if you have to do that to manage the trade, so I generally avoid underlyings with weak strike granularity for earnings plays that are generally just made to take advantage of the ensuing volatility contraction. I would consequently lean toward plays in COIN, CFLT, PPL, and DASH for volatility contraction plays, looking to get into
CFLT, Wednesday before market close (since it announces Wednesday after market close).
PPL, Wednesday before market close (since it announces Thursday before market open).
COIN, Thursday, before market close.
DASH, Thursday, before market close.
Preliminary Setups:
CFLT May 19th 22.5 Short Straddle, 3.60 credit, 18.90/26.10 break evens
PPL: May 19th 29 Short Straddle, 1.03 credit. (Well, that's ... weak sauce. It's possible that the platform is misreporting 30-day, so this will have to be checked during the NY session).
COIN: May 19th 45/67 Short Strangle, 3.29 credit. (A smidge pesky, since I'd want to set up my put side tent somewhere between the 45 and the 40 strike, where there aren't any strikes at the moment.)
DASH: May 19th 52/73 Short Strangle, 1.95 credit.
There isn't anything in the exchange-traded fund space as of Friday close with an IVR >50%, but there are a few with 30-day IV >35% (which is the combination of metrics I like to see). Here there are, ranked by 30-day with stuff <$20/share weekend weeded out:
ARKK 41
KRE 41
KWEB 39
GDXJ 37
USO 36
XOP 35
Pictured here is a fairly plain Jane delta neutral short strangle in ARKK in the June expiry with the short legs camped out around the 16 delta, paying 1.00 at the mid price with break evens at 30 and 43.
The KRE June 16th 37/48 short strangle (16 delta) is paying around 1.25.
The KWEB June 16th 28 short straddle is paying around 1.95. (Going 16 delta short strangle didn't end up paying much; the 26/30.5 was paying .55).
The GDXJ June 16th 35/46 short strangle (17 delta) is paying 1.04 at the mid.
The USO June 16th 60.76 short strangle (17 delta) is paying 1.65 at the mid.
The XOP June 16th 112/143 short strangle (17 delta) is paying 3.04 at the mid.
Broad Market
Ugh. Why even go here ... . Broad market exchange-traded funds, ranked by 30-day IV:
IWM 21.3%
QQQ 20.6%
EFA 16.2%
SPY 16.1%
DIA 14.3%
Bond Funds
My only observation here is to note that TLT premium is better than SPY's (as is EMB's).
EMB 20.9%
TLT 17.0%
HYG 9.5%
AGG 7.4%
And, of course, there are earnings ... . I've screened and ranked these by >50% 30-day IV, as well as for options liquidity and thrown out underlyings that are trading at <$20/share:
COIN 111.2 (Thursday after market close)
W 107
RUN 92.9
CFLT 80.9 (Wednesday after market close)
PPL 73.4 (Thursday before market open)
FOUR 72.0
DASH 70.2 (Thursday after market close)
The drawbacks to W, RUN, and FOUR involve strike to strike granularity, which is why I haven't bothered to look up their announcement days and times. W and RUN have 1 1/2 wides; FOUR, has 5-wides. Not having 1-wides can not only make setting up delta neutral a pain; it can making rolling out a pain if you have to do that to manage the trade, so I generally avoid underlyings with weak strike granularity for earnings plays that are generally just made to take advantage of the ensuing volatility contraction. I would consequently lean toward plays in COIN, CFLT, PPL, and DASH for volatility contraction plays, looking to get into
CFLT, Wednesday before market close (since it announces Wednesday after market close).
PPL, Wednesday before market close (since it announces Thursday before market open).
COIN, Thursday, before market close.
DASH, Thursday, before market close.
Preliminary Setups:
CFLT May 19th 22.5 Short Straddle, 3.60 credit, 18.90/26.10 break evens
PPL: May 19th 29 Short Straddle, 1.03 credit. (Well, that's ... weak sauce. It's possible that the platform is misreporting 30-day, so this will have to be checked during the NY session).
COIN: May 19th 45/67 Short Strangle, 3.29 credit. (A smidge pesky, since I'd want to set up my put side tent somewhere between the 45 and the 40 strike, where there aren't any strikes at the moment.)
DASH: May 19th 52/73 Short Strangle, 1.95 credit.