EARNINGS
No options highly liquid underlying earnings announcements this coming week.
EXCHANGE-TRADED FUNDS
Ordered by implied volatility rank:
SLV (80/27)
GDXJ (74/39)
GDX (72/33)
GLD (76/13)
TLT (62/16)
XOP (43/40)
Precious metals and miners still hanging in there another week with high rank/high implied with GDXJ presenting the best rank/implied metrics of >50 rank/>35% implied.
The GDXJ Oct 36/47 short strangle pays 1.13 with break evens of 34.87/48.13 and delta/theta metrics of -5.28/3.06.
BROAD MARKET
IWM (37/22)
SPY (37/19)
FXI (33/22)
DIA (30/18)
QQQ (29/22)
EEM (28/20)
EFA (22/14)
Pictured here is an IWM Feb 21st 125/173 ratio'd short strangle with the short put at the 14 delta and the short calls at the 7 delta -- doubled up to accommodate put side skew. It's paying 3.04 at the mid price as of Friday close, with break evens at 121.96/174.52 and delta/theta of -.61/2.89. An example of a defined risk counterpart would be the 115/125/2 x 173/2 x 178 iron condor, paying 1.51 at the mid price with 123.49/173.76 break evens, and delta/theta metrics of -.45/1.00.
VIX/VIX DERIVATIVES
VIX finished on Friday at 18.98 with the notable characteristic of the /VX term structure being that everything but for the September contract is lower than where October is trading. Consequently, the September or October expiries would be amenable to a term structure trade, with a short call vertical or long put vertical set up with a break even at or above where the corresponding /VX contract is trading. Because the September /VX contract was trading below spot as of Friday close (18.84 versus 18.98 spot) and there's only 16 days 'til expiry, I'd probably opt for October to set this up. Both the VIX Oct 19/21 short call vertical, .65 credit, break even at 19.65 and the 18/21 short call vertical, 1.10 credit, break even at 19.10 would fit the bill, with the October /VX trading at 19.20 as of Friday close.
With VXX and UVXY, continue to look to leg into bearish assumption spreads on VIX pops to >20 with spread break evens at or above where the underlying is currently trading.
No options highly liquid underlying earnings announcements this coming week.
EXCHANGE-TRADED FUNDS
Ordered by implied volatility rank:
SLV (80/27)
GDXJ (74/39)
GDX (72/33)
GLD (76/13)
TLT (62/16)
XOP (43/40)
Precious metals and miners still hanging in there another week with high rank/high implied with GDXJ presenting the best rank/implied metrics of >50 rank/>35% implied.
The GDXJ Oct 36/47 short strangle pays 1.13 with break evens of 34.87/48.13 and delta/theta metrics of -5.28/3.06.
BROAD MARKET
IWM (37/22)
SPY (37/19)
FXI (33/22)
DIA (30/18)
QQQ (29/22)
EEM (28/20)
EFA (22/14)
Pictured here is an IWM Feb 21st 125/173 ratio'd short strangle with the short put at the 14 delta and the short calls at the 7 delta -- doubled up to accommodate put side skew. It's paying 3.04 at the mid price as of Friday close, with break evens at 121.96/174.52 and delta/theta of -.61/2.89. An example of a defined risk counterpart would be the 115/125/2 x 173/2 x 178 iron condor, paying 1.51 at the mid price with 123.49/173.76 break evens, and delta/theta metrics of -.45/1.00.
VIX/VIX DERIVATIVES
VIX finished on Friday at 18.98 with the notable characteristic of the /VX term structure being that everything but for the September contract is lower than where October is trading. Consequently, the September or October expiries would be amenable to a term structure trade, with a short call vertical or long put vertical set up with a break even at or above where the corresponding /VX contract is trading. Because the September /VX contract was trading below spot as of Friday close (18.84 versus 18.98 spot) and there's only 16 days 'til expiry, I'd probably opt for October to set this up. Both the VIX Oct 19/21 short call vertical, .65 credit, break even at 19.65 and the 18/21 short call vertical, 1.10 credit, break even at 19.10 would fit the bill, with the October /VX trading at 19.20 as of Friday close.
With VXX and UVXY, continue to look to leg into bearish assumption spreads on VIX pops to >20 with spread break evens at or above where the underlying is currently trading.
Comment:
If futures are any indication, both the VIX setup and the IWM trade will require adjustment of strikes at NY open. /RTY is off nearly 19 handles as of the foreshortened Monday futures close, which translates into about two handles of down in IWM. We will also no doubt get a minor implied volatility pop such that an earlier expiry such as January may pay.