THE WEEK AHEAD: ULTA EARNINGS; APA, UNG, VIX

1 dic 2019

EARNINGS:

Earnings are light in the coming week, with ULTA (90/47) being the best candidate metrically for a earnings-related volatility contraction play, although its liquidity isn't great.

Pictured here is a 205/210/265/270 iron condor in the January cycle that is paying 2.06 at the mid (1.03 at 50% max). Markets, however, are showing wide here.

SINGLE NAME WITH EARNINGS IN THE REAR VIEW:

APA (100/71)
CGC (75/89)
NTNX (66/43)
X (52/27)

See APA, CGC posts below.

EXCHANGE-TRADED FUNDS:

UNG (51/54)
USO (37/37)
TLT (34/12)
XLE (26/19)
FXI (23/20)
XOP (23/34)

First expiries in which at-the-money short straddle pays >10% of the value of the underlying:

UNG: January, 2.84 versus 17.83 (15.9%)
USO: April, 1.84 versus 11.62 (15.8%)
TLT: January of '21, 14.78 versus 140.42 (10.5%)
XLE: June, 7.20 versus 58.89 (12.2%)
FXI: May, 4.18 versus 40.94 (10.2%)
XOP: January, 2.06 versus 20.36 (10.1%)

Already up to my nipples in oil and gas plays, so may consider a small FXI position. Naturally, May is a bit farther out in time than I'd like -- the 36/46 short strangle camped out around the 16 delta is paying 1.06 there.

BROAD MARKET:

QQQ (4/15)
IWM (4/15)
SPY (4/12)

First expiries in which at-the-money short straddle pays >10% of the value of the underlying:

QQQ: June, 21.71 versus 205.10 (10.6%)
IWM: June, 16.34 versus 161.77 (10.1%)
SPY: Sept, 34.63 versus 314.31 (11.0%)

QQQ June 181/226 20 delta short strangle, 6.48 credit (1.62 at 25% max; 3.24 at 50% max)
IWM June 143/180 20 delta put/16 delta call* short strangle, 4.33 credit (1.08 at 25% max; 2.17 at 50% max)
SPY September 274/345 20 delta short strangle, 10.70 credit (2.68 at 25% max; 5.35 at 50% max).


* -- Strikes on the call side are 5-wide at the moment, with the 180 at the 16, the 175 at the 25.

FUTURES:

/6B (63/14)
/NG (51/90)
/ZF (39/3)
/CL (37/39)
/ZN (37/4)

OVX popped big on Friday, so I will look to add short premium setups in /CL if that nearly 37 print hangs in there over the next couple of sessions.

VIX/VIX DERIVATIVES:

With /VX futures contracts trading at 16.39, 17.65, and 17.86 in January, February, and March, respectively. VIX term structure trades remain viable for those expiries. For everything else, wait for a pop in VIX -- which finished Friday's session at 12.62 ... .