THE WEEK AHEAD: NFLX EARNINGS; XME, GDXJ/GDX, XBI; VIX
EARNINGS:
NFLX (46/41) (Tuesday After Market Close).
The metrics aren't ideal here, with the rank below 70%, the 30-day below 50% and the at-the-money short straddle paying less than 10% of the value of the underlying in the February cycle, but this is the best of the bunch announcing next week in terms of both liquidity and implied volatility.
Pictured here is a February cycle 305/385 delta neutral short strangle paying 7.00 with delta/theta metrics of .84/27.72. Alternatively, go defined risk, shooting to collect one-third the width of the wings with a 305/310/380/385 iron condor paying 1.88 with delta/theta of .70/3.48.
I will consider going out farther In time to March to get paid, but the trade-off is that any volatility crush gets muted if you do that. That being said, you do get wider break evens for a similarly delta'd short strangle, so get more room to be wrong. For instance, the similarly delta'd March setup is the 295/395 paying 8.13 at the mid price with delta/theta metrics of -.91/18.54, with break evens of 286.87/403.13 versus the shorter duration's 298/392.
EXCHANGE-TRADED FUNDS:
... ordered by rank and showing the month in which the at-the-money short straddle pays greater than 10% of the value of the underlying. I've culled out funds that aren't paying that in 180 days' duration or less, since no one likes to wait that long for their candy.
XME (30/21), June
GDXJ (17/28), May
XBI (12/24), June
GDX (11/25), April
USO (11/29), April
XLE (6/16), July
SMH (4/21), May
EWZ (3/24), June
XOP (2/28), April*
I've already got GDX, EWZ, XBI, and XOP on, so may look at getting into some XME, even though there is some overlap with miner holdings, and/or redipping my stick into some SMH, since that pays in a shorter duration.
BROAD MARKET:
Nothing is paying in <180 day duration .... .
FUTURES (EXCLUDING TREASURIES AND CURRENCIES):
/NG (39/42)
/GC (29/11)
/ZC (29/24)
/SI (28/18)
/CL (23/28)
/ES (10/12)
/ZW (8/23)
Natty is juiced with last week's sell-off, with some understandable trade-related friskiness in the ag complex. Oil's still paying, but only in durations of April or longer.
VIX/VIX DERIVATIVES:
VIX finished the week levitating a dime above the 12 handle with only the April, May, and June /VX contracts paying greater than 16 (16.05, 16.33, and 16.75, respectively). My general preference for term structure trades is to short only in expiries where the correspondent /VX future is trading above 16 and ordinarily in <90 day duration (e.g., the VIX April 15th 16/18, 87 days 'til expiry, .55 at the mid price with a break even of 16.55 versus the the /VX April contract of 16.05), so would probably only pull the trigger on an April setup.
For UVXY and VXX, my short volatility go-to's, I'm patiently waiting for a pop to add and/or to roll what I've got into strength, of which we've had very little. VXX was down 5.67% for the week; UVXY, 8.37%.
* -- There isn't an April expiry as of the writing of this post, but January fell off last week, so one will likely be opened and populate this week.
NFLX (46/41) (Tuesday After Market Close).
The metrics aren't ideal here, with the rank below 70%, the 30-day below 50% and the at-the-money short straddle paying less than 10% of the value of the underlying in the February cycle, but this is the best of the bunch announcing next week in terms of both liquidity and implied volatility.
Pictured here is a February cycle 305/385 delta neutral short strangle paying 7.00 with delta/theta metrics of .84/27.72. Alternatively, go defined risk, shooting to collect one-third the width of the wings with a 305/310/380/385 iron condor paying 1.88 with delta/theta of .70/3.48.
I will consider going out farther In time to March to get paid, but the trade-off is that any volatility crush gets muted if you do that. That being said, you do get wider break evens for a similarly delta'd short strangle, so get more room to be wrong. For instance, the similarly delta'd March setup is the 295/395 paying 8.13 at the mid price with delta/theta metrics of -.91/18.54, with break evens of 286.87/403.13 versus the shorter duration's 298/392.
EXCHANGE-TRADED FUNDS:
... ordered by rank and showing the month in which the at-the-money short straddle pays greater than 10% of the value of the underlying. I've culled out funds that aren't paying that in 180 days' duration or less, since no one likes to wait that long for their candy.
XME (30/21), June
GDXJ (17/28), May
XBI (12/24), June
GDX (11/25), April
USO (11/29), April
XLE (6/16), July
SMH (4/21), May
EWZ (3/24), June
XOP (2/28), April*
I've already got GDX, EWZ, XBI, and XOP on, so may look at getting into some XME, even though there is some overlap with miner holdings, and/or redipping my stick into some SMH, since that pays in a shorter duration.
BROAD MARKET:
Nothing is paying in <180 day duration .... .
FUTURES (EXCLUDING TREASURIES AND CURRENCIES):
/NG (39/42)
/GC (29/11)
/ZC (29/24)
/SI (28/18)
/CL (23/28)
/ES (10/12)
/ZW (8/23)
Natty is juiced with last week's sell-off, with some understandable trade-related friskiness in the ag complex. Oil's still paying, but only in durations of April or longer.
VIX/VIX DERIVATIVES:
VIX finished the week levitating a dime above the 12 handle with only the April, May, and June /VX contracts paying greater than 16 (16.05, 16.33, and 16.75, respectively). My general preference for term structure trades is to short only in expiries where the correspondent /VX future is trading above 16 and ordinarily in <90 day duration (e.g., the VIX April 15th 16/18, 87 days 'til expiry, .55 at the mid price with a break even of 16.55 versus the the /VX April contract of 16.05), so would probably only pull the trigger on an April setup.
For UVXY and VXX, my short volatility go-to's, I'm patiently waiting for a pop to add and/or to roll what I've got into strength, of which we've had very little. VXX was down 5.67% for the week; UVXY, 8.37%.
* -- There isn't an April expiry as of the writing of this post, but January fell off last week, so one will likely be opened and populate this week.
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