THE WEEK AHEAD: NFLX EARNINGS, GDXJ, QQQ, /CL
EARNINGS:
Pictured here is a delta neutral, ratio'd NFLX (47/54) short strangle paying 5.07 at the mid price with 222.46/350.07 break evens. This put side is doubled up to accommodate call side skew.
A defined risk alternative: The November 15th, put side "double double" 2 x 225/2 x 230/335/345 iron condor, paying 1.84 with break evens wide of the 1 standard deviation line at 229.08/336.84. Since it's been a bit of a mover in the past, I'm inclined to go wider and avoid side test as opposed to going tighter and collecting more credit up front.
NFLX announces tomorrow, presumably after market close, so look to put on a play in the waning hours of the New York session, adjusting strikes as necessary to accommodate any intraday movement.
EXCHANGE-TRADED FUNDS
SLV (71/27)
GLD (68/16)
GDXJ (62/37)
GDX (58/32)
TLT (49/14)
USO (40/41)
XOP (35/40)
Freaky how precious metal volatility is hanging in there; it's almost becoming the premium selling trade of the year. GDXJ offers the most favorable rank/implied metrics of the complex.
BROAD MARKET
IWM (20/20)
SPY (14/15)
QQQ (13/19)
DIA (11/15)
EFA (24/14)
First Expiry In Which At-The-Money Short Straddle Pays >10%:
IWM: May -- 17.05 versus 149.67 spot (11.4%)
SPY: June -- 31.71 versus 295.95 spot (10.7%)
QQQ: March -- 19.41 versus 191.09 spot (10.1%)
DIA: June -- 27.93 versus 267.86 spot (10.4%)
EFA: June -- 6.57 versus 65.28 spot (10.1%)
The basic message here is that short duration premium selling in broad market probably isn't worth it at the moment. The QQQ March 15th (158 days) 163/2 x 220 ratio'd short strangle is paying 3.60 and taking that off at >25% max (.90/$90 profit) might be compelling to some, however.
FUTURES (Excluding the Treasury Complex)
/6B (81/31)
/SI (71/25)
/GC (68/15)
/ZW (54/30)
/ZS (50/23)
/ZC (45/34)
/CL (40/41)
Cable pops to the top of the list, followed by precious metals, ags, and oil. I continue to work a /CL core position, as well as some /GC here. Truth be told, I'm not sure that there's much of a risk premium edge to /GC here in light of its low background implied, so am putzing with it more as an engagement trade than anything else.
VIX/VIX DERIVATIVES
Crushed back to sub-15. Wait for another pop to VIX >20 to add bearish assumption in VXX/UVXY or 2019 lows to add VIX bullish assumption spreads.
Pictured here is a delta neutral, ratio'd NFLX (47/54) short strangle paying 5.07 at the mid price with 222.46/350.07 break evens. This put side is doubled up to accommodate call side skew.
A defined risk alternative: The November 15th, put side "double double" 2 x 225/2 x 230/335/345 iron condor, paying 1.84 with break evens wide of the 1 standard deviation line at 229.08/336.84. Since it's been a bit of a mover in the past, I'm inclined to go wider and avoid side test as opposed to going tighter and collecting more credit up front.
NFLX announces tomorrow, presumably after market close, so look to put on a play in the waning hours of the New York session, adjusting strikes as necessary to accommodate any intraday movement.
EXCHANGE-TRADED FUNDS
SLV (71/27)
GLD (68/16)
GDXJ (62/37)
GDX (58/32)
TLT (49/14)
USO (40/41)
XOP (35/40)
Freaky how precious metal volatility is hanging in there; it's almost becoming the premium selling trade of the year. GDXJ offers the most favorable rank/implied metrics of the complex.
BROAD MARKET
IWM (20/20)
SPY (14/15)
QQQ (13/19)
DIA (11/15)
EFA (24/14)
First Expiry In Which At-The-Money Short Straddle Pays >10%:
IWM: May -- 17.05 versus 149.67 spot (11.4%)
SPY: June -- 31.71 versus 295.95 spot (10.7%)
QQQ: March -- 19.41 versus 191.09 spot (10.1%)
DIA: June -- 27.93 versus 267.86 spot (10.4%)
EFA: June -- 6.57 versus 65.28 spot (10.1%)
The basic message here is that short duration premium selling in broad market probably isn't worth it at the moment. The QQQ March 15th (158 days) 163/2 x 220 ratio'd short strangle is paying 3.60 and taking that off at >25% max (.90/$90 profit) might be compelling to some, however.
FUTURES (Excluding the Treasury Complex)
/6B (81/31)
/SI (71/25)
/GC (68/15)
/ZW (54/30)
/ZS (50/23)
/ZC (45/34)
/CL (40/41)
Cable pops to the top of the list, followed by precious metals, ags, and oil. I continue to work a /CL core position, as well as some /GC here. Truth be told, I'm not sure that there's much of a risk premium edge to /GC here in light of its low background implied, so am putzing with it more as an engagement trade than anything else.
VIX/VIX DERIVATIVES
Crushed back to sub-15. Wait for another pop to VIX >20 to add bearish assumption in VXX/UVXY or 2019 lows to add VIX bullish assumption spreads.
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