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GDXJ

THE WEEK AHEAD: COST, GDXJ, IWM, CL1!EARNINGS: COST (71/29) announces earnings this week, along with THO (89/66), PEP (32/21), and LEN (26/35). Pictured here is a directionally neutral iron condor camped out around the 14 delta strikes for the shorties paying 1.04 (.52 at 50 max) with break evens at 253.96/316.04, which are slightly wide of one standard deviation. The correspondent short strangle at 215/315 pays 3.74, although you can certainly tighten that up to get a surgical 2x expected move setup at the 260/310, which is paying 5.15. They're scheduled to announce on Thursday, October 3rd after market close, so look to put on a play in the waning hours of the New York session on Thursday. Although THO has more ideal volatility metrics, you'll face problems there with 5-wides in the November cycle, and PEP metrics are too low for my tastes to bother with, with 30-day background at 21. EXCHANGE-TRADED FUNDS GDX (74/34) SLV (73/27) GDXJ (70/38) GLD (61/15) TLT (58/15) XOP (44/41) I don't know if there's every been a longer period of time in which precious metals have been at the top of the premium stack for such an extended period of time. GDXJ has the most ideal metrics, with rank >50%, and implied >35%: the November 15th 34/43 delta neutral short strange with the short strikes at the 20 delta's paying 1.22 at the mid. If you're tired of playing gold, consider a play in XOP: the November 15th 22/23* almost a short straddle short strangle, is paying 2.08. * -- XOP finished Friday's trading session at 22.51, which is why I'd split the straddle a tad here in the absence of a directional assumption. BROAD MARKET Last week saw a bump in volatility, but it still isn't great short to medium term to sell premium in broad market exchange-traded funds. Running the 10% short straddle test on the highest implied volatility broad market exchange-traded fund -- IWM, shows that you'd have to go all the way out to February (145 days 'til expiration) to get the at-the-money short straddle to pay greater than 10% of the value of the stock; the IWM February 21st 151 short straddle is paying 15.11 versus Friday's closing price of 151.16. Not everyone likes to go out that far out in time, since it takes longer for those types of plays to come in, but would consider something in that cycle if I don't want to play earnings, I have substantial buying power sitting idle, or I'm inclined to a slower, less attention-intensive type of trading. The IWM February 21st 1 x 2 ratio'd 130/174 short strangle is paying 3.03/1.51 at 50% max, with 1x contracts at the 15 delta on the put side, 2x contracts at the 7 delta on the call side to accommodate skew, with the February 21st 120/130/2x172/2x175 "double double" paying 1.74. Setting up a double double in that expiry is a bit pesky at the moment, since the put side is limited to 5-wides. FUTURES /ZF (75/4) /SI (73/25) /6B (61/11) /GC (61/14) /UB (58/5) /ZB (58/10) /ZS (51/22) /ZN (44/5) /CL (37/40) Friskiness in precious metals (/SI, /GC), friskiness in treasuries (/ZF, /UB, /ZB, /ZN), with some volatility left in beans (/ZS) and oil (/CL). 10% Short Straddle Tests: /SI January 28th 17.5 short straddle: 1.93 versus 17.59. /CL December 16th 56 short straddle: 7.10 versus 56.18. I've got /CL setups on in both the November and December cycles, but this implies that it may not be worth initiating premium selling in /CL in the November cycle. Honorable Mention: /NG (25/44). I pulled the trigger on a UNG play at seasonal lows, after which /NG popped temporarily. It has receded back from mid-September highs around 2.70 and closed Friday around 2.40. Ideally, I'd want in at 2016 lows (<1.75), but that may be asking for a bit much ... . VIX/VIX DERIVATIVES VIX ended the week above 17. While an exciting development for short volatility traders, I would keep my pistol in my holster for the time being, waiting for VIX pops to greater than 20 to start legging into bearish assumption positions in either the VIX itself or derivative products like VXX or UVXY.
NASDAQ:COST
by NaughtyPines
THE WEEK AHEAD: GDXJ, XOP, /CLEARNINGS: No earnings announcements this coming week in underlyings with highly liquid options with ideal rank/implied metrics (>70% rank/>50% 30-day implied). EXCHANGE-TRADED FUNDS: SLV (86/30) GDX (80/17) TLT (63/16 GDX (63/33) GDXJ (61/36) XOP (44/41) Like a broken record for the umpteenth week in a row: precious metals,, with GDXJ offering the best volatility metrics (>50% rank/>35% 30-day implied) . BROAD MARKET: IWM (24/19) SPY (20/15) QQQ (16/19) EEM (12/17) EFA (16/12) Objectively, broad market premium selling isn't paying greatly here in <90 days 'til expiry duration: IWM November 155 short straddle, 8.84, 5.7% of the current stock price; December 155 short straddle, 11.66, 7.5%; January 155 short straddle, 13.09, 8.4%, with the first expiry paying greater than 10% in March (March 20th 155, 16.47) with the correspondent March 20th nearest the 16 delta short strangle 130/175 paying 3.19. This isn't horrid, but represents a long time to wait for your candy, although a less than 50% max take profit on such a setup might be compelling for some. (e.g., 25% max take profit of .80 ($80) as opposed to waiting for a full 50. FUTURES: /SI (86/29) /GC (80/16) /UB (63/5) /ZB (63/11) /6B (62/26) /ZS (65/26) /ZN (49/6) /ZC (43/23) /CL (37/42) Although /CL rank isn't ideal here, keep in mind that we had that mid-September OVX pop, which will skew where the current 30-day lies in relation to the 52-week range. The November 15th 58.5 short straddle is paying 6.67, 11.4% of where WTI is currently trading; the December 16th 58.5, 8.20, 14%, with their corresponding 16 delta short strangles paying 1.44* and 1.77** respectively, both of which beat a poke in the eye with a sharp stick. VIX/VIX DERIVATIVES: VIX finished the week at 15.32 ... . Continue to hand sit on short volatility setups, waiting for VIX prints of >20. * -- The November 15th 51/70. ** -- The December 16th 49/71.5.
AMEX:GDXJ
by NaughtyPines
THE WEEK AHEAD: GDXJ, /ZC, /ZSEARNINGS: No earnings announcements this coming week in underlyings with highly liquid options with ideal rank/implied metrics (>70% rank/>50% 30-day implied). EXCHANGE-TRADED FUNDS: SLV (82/29) GDX (74/33) TLT (71/15) GDXJ (60/37) GLD (59/15) XOP (35/37) Precious metals ... again, with GDXJ offering the best volatility metrics (>50% rank/>35% 30-day implied) BROAD MARKET: IWM (23/19) SPY (13/13) QQQ (11/18) EEM (7/16) EFA (15/11) FUTURES: /SI (82/28) /UB (71/5) /ZB (71/12) /ZN (61/6) /ZS (63/28) /GC (59/15) /ZC (52/28) Pictured here is a corn short strangle in the October/40 days 'til expiry cycle with strikes camped out around the 1 standard deviation on the put side at 14 delta and the call side at the 13 delta strike, resulting in a delta neutral setup supposedly paying 4.00 at the mid price with break evens at 336 and 409. Naturally, that'll have to be priced out during regular market hours. There also may be some benefit in going out to November, where the implied volatility is at 25.3% versus October's 24.1% and where implied volatility contracts from there into winter and spring with February at 20.5% and April at 17.5%. An alternative trade would be in October beans; the 830/990 short strangle paying 4.75 with the short put erected at the one standard deviation strike on the put side, the call at the equally delta'd strike on the call. For contrast: corn's implied volatility term structure: October -- 23.3%, November 17.8%, December 19.2%, February 16.6%, April 15.8%. Naturally, either of these setups can be transformed into defined risk, iron condor trades by buying wings. VIX/VIX DERIVATIVES: Yowsa! VIX finished the week at sub-14 (13.74), so it's basically time to hand sit on what you put on in August volatility and wait for the next >20 pop to short.
CBOT:ZC1!
by NaughtyPines
THE WEEK AHEAD: GDXJ, VIXEARNINGS No options highly liquid underlying earnings announcements this coming week. EXCHANGE-TRADED FUNDS Ordered by implied volatility rank: SLV (99/33) GDX (71/33) GDXJ (67/37) XLU (60/14) GLD (59/15) Pictured here is a GDXJ Oct 14th 36/44 short strangle, paying 1.23 at the mid with break evens at 34.77/45.23, and delta/theta metrics of 1.46/3.08. BROAD MARKET IWM (25/19) SPY (20/15) DIA (16/15) QQQ (15/19) EFA (8/12) EEM (2/17) We're a bit out of cycle for October expiry trades (40 days until expiry), and if you're like me, you loaded up a little heavy in all that volatility in August, so not a bad thing to hand sit here, manage what you put on ... . VIX/VIX DERIVATIVES VIX closed the week at 15.00 with the /VX term structure returning to its "basic look" (i.e., spot under M1, everything sloping gradually higher as you go out in time). In spite of the fact that we're under the 16 handle, VIX is still amenable to a decent "term structure" trade in the October or November cycles (or both), with the /VX future trading at 17.65 versus 15.00 spot in October and 18.00 versus 15.00 spot in November as of the writing of this post. October (37 Days Until Expiry) term structure trades: VIX October 16th 17/19 short call vertical, .65 credit at the mid price, break even at 17.65 versus October /VX contract at 17.65. VIX October 16th 17/20 short call vertical, .90 credit at the mid price, break even at 17.90 versus October /VX contract at 17.65. November (72 Days Unit Expiry) term structure trades: VIX November 20th 17/20 short call vertical, .95 credit at the mid price, break even at 17.95 versus November /VX contract at 18.00. VIX November 20th 18/21 short call vertical, .80 credit at the mid price, break even of 18.80 versus November /VX contract at 18.00. For all other, non-inverse derivatives, hand sit on entering short delta setups in the absence of VIX pops to >20.
AMEX:GDXJ
by NaughtyPines
2
GLD / SLV vs Dollar Index Long Term.A key consideration usually in any Asset is the correlations. Precious metals - XAUUSD (gold) / SILVER have a perfect inverse correlation to the dollar index. I will leave it on the reader to plot it. HINT: Plot XAUUSD and COMPARE with (1/DXY). It's difficult (with all the Fake News) to decipher if Gold will have great demand going further or not. Commodities usually have a 30 year cycle. And in commodity cycles they usually go down for 20 years and then peak in 10 years to complete the 30 year cycle. Looking at that fundamental we realize that XAUUSD / GOLD should start a secular bull run in 2011+20 yrs = 2031. Which coincidentally is also 30 years since the start of previous Bull run in 2001. Looking at the other side of it, at DXY - I realized that there are 2 ways to look at it technically - either the J horns which show the start of a secular BEAR market for USD. This would indicate a secular BULL market for GOLD. A flip side to look at is drawing straight lines - I personally lean towards this one as we already are on a log chart. With these blue lines, we see a BULL trend in DXY. A bull trend here means a BEAR trend in GOLD. If the above is to be true, then GOLD is merely going through Elliott Wave B and will crash down to 800 (bottom of previous wave 4) before picking up again. What do you think ?
INDEX:DXY
by iamajeya
1
What the hell just happened to SLVI said silver (SLV) was going to rise but it honestly has shocked even me. Lately it had the momentum of a runaway train and even started going exponential with several gaps up it now has to fill, but when it blew past the second blue top line (a long term overhead resistance going back to 2015 if you can believe it) I was truly shocked. I sold a lot of positions in anticipiation of a pullback just over 16.00 but the resistance of the large channel we identified several weeks ago has been an excellent guide. Today there was a monumental pullback. After first rising over a 1% for the day it was down 0.7% at the time of writing. The other sign that a large pullback is due are the COT reports which show the largest institutional short position since January of this year in precious metals. My patience for a large pull back has finally come. At the very least it needs to come back to the top blue line, but based on the size and breadth of the upward channel it could easily pull back even further. We will watch key support areas but at the close of today a short position was entered in the precious metals/miners market (please refer to GDXJ which failed to make a higher high and has already breached the upward channel).
AMEX:SLVShort
by DanjaZown
1
THE WEEK AHEAD: GDX, GDXJ, XOP, EEM, VIX/VIX DERIVATIVESEARNINGS No options highly liquid underlying earnings announcements this coming week. EXCHANGE-TRADED FUNDS Ordered by implied volatility rank, with GDX, GDXJ, and XOP providing the best rank/implied volatility metrics for premium selling (>50% rank/>35% implied): SLV (96/29) GLD (95/18) GDX (82/35) GDXJ (80/40) TLT (69/16) FXI (54/26) XOP (52/43) The 16 delta GDXJ Oct 18th 36/49 short strangle is paying 1.16 at the mid price (.58 at 50 max), the GDX Oct 18th 30 short straddle, 3.19 (.80 at 25 max), and the XOP Oct 18th 21 short straddle, 2.67 (.67 at 25 max). BROAD MARKET EEM (51/23) IWM (48/25) SPY (43/20) QQQ (35/25) EFA (22/17) Pictured here is an EEM 1 x 2 short strangle in the January cycle with the short put camped out at the 18 delta, the doubled up short calls at the 8's to accommodate skew. Paying 1.18 at the mid price (.59 at 50% max), it has break evens of 32.82/45.59 and delta/theta metrics of .97/1.56. Alternatively, the Jan 17th 39 short straddle is paying 4.32 (1.08 at 25 max). If EEM doesn't suit your fancy, the IWM Jan 17th 131/156 short strangle camped out around the 16 deltas is paying 2.16 at the mid price (1.08 at 50 max); the QQQ Dec 20th 16 delta 158/202 short strangle pays 4.05 (2.02 at 50 max); and the SPY March 20th 240/315, 7.39 (3.70 at 50 max).* VIX/VIX DERIVATIVES Continue to look to add small, bearish assumption plays in VIX/VIX derivatives on VIX prints of >20, with higher prints naturally being better. With the derivatives in particular, look to VIX levels as the guide for entries and not to the derivative itself (e.g., UVXY, VXX), since beta slippage and contango plays into these derivatives, making it more difficult to discern levels. The general plays remain: at-the-money VIX long put verticals or short call verticals paying at least one-third the width of the spread in credit (or, in the case of the debit spread, less than two-thirds the width of the spread in debit) and with UVXY and VXX, short call verticals with similar metrics.** * -- Why the different expiries? I've been generally running broad market plays through a gauntlet of at-the-money delta neutral short straddle pricing prior to deciding which expiry begins to be "worthwhile," looking for the short straddle to pay at least 10% of the stock price. If the ATM short straddle isn't paying that, it isn't worth putting on a short strangle in shorter duration for me. The downside is that longer-dated setups are slower to come in and therefore tie up buying power for longer. The upside: they're wider setups relative to current price, so less subject to shorter term whipsaw. ** -- As previously pointed out, there is assignment risk with UVXY and VXX, and I'd rather be short shares via assignment on a short call than long shares via assignment on a short put. VIX is cash settled with no assignment risk, so whether there is a short put aspect or short call aspect is of little import for a VIX play.
AMEX:EEM
by NaughtyPines
THE WEEK AHEAD: BIDU EARNINGS; GDXJ, EEM, VIX/VXX/UVXYEARNINGS BIDU (97/55) announces earnings on Monday after market close, so look to put on a play in the waning hours of the New York session ... . Pictured here is a September 80/120 short strangle paying 1.65 as of Friday close with delta/theta metrics of 1.57/8.07. You can naturally go defined risk, but you'll have to go in a smidge tighter with the shorts to collect one-third the width of the wings and being surgical with your strikes will be tough with 5-wides in that expiry. The September 20th 80/85/110/115 is paying 1.62 with delta/theta metrics of .26/3.20. EXCHANGE-TRADED FUNDS Precious metals keep on grinding in a high implied volatility state for yet another week, with the ideal rank/implied metrics remaining in GDXJ and nearly ideal ones in GDX: GLD (80/16) GDXJ (77/38) SLV (77/25) TLT (76/17) GDX (72/33) BROAD MARKET EFA (53/17) EEM (52/22) IWM (36/22) SPY (35/18) QQQ (27/22) Since I don't have anything on in EEM, I may consider putting on something longer-dated there. Using the delta neutral at-the-money short straddle test and looking for a setup that pays greater than 10% of the value of the underlying, it looks like I would have to go out to January where the 40 short straddle is paying 4.54 versus 39.54 the shares were trading at as of Friday close. The January 17th 40 short straddle pays 4.54 with break evens at 35.46/44.54 and has delta/theta metrics of 1.96/1.13 and a 25 max of 1.13; the 16 delta 34/44 short strangle pays 1.05 (.52 at 50 max) with break evens of 32.05/45.05 and delta/theta metrics of -.15/.86. I'm fine with either, but there's something to be said for having room to adjust without going inverted with the short strangle. VIX/VIX DERIVATIVES VIX finished Friday at 18.47 with the /VX term structure still in backwardation from September to December, with the August contract settling next week. I will continue to look to add at-the-money bearish assumption setups (short call verticals or long put verticals) in VIX in the front month (September) should we get additional pops to >20 and/or the same type of setup in UVXY and VXX using VIX levels as a guide. As of Friday close, the VIX September 18th 18/21 short call vertical was paying 1.10 at the mid with a break even of 19.10 versus 18.47 spot, but will probably wait for another pop to >20 to put on a similar setup.* * -- Short call verticals: short in the money, long out of the money, paying one-third the width of the spread. Long put verticals: short out of the money, long in the money, paying less than one-third the width in debit. Short call verticals with the same strikes as a long put vertical have the same risk, so it's a matter of taste and/or the practicalities of having a bunch of different plays on in the same expiry as to which you use. For example, you can layer on same strike long put verticals over short call verticals without inadvertently "stepping on" the short call verticals you have on. As compared to VIX options -- which settle to cash, with UVXY and VXX, there's naturally some assignment risk, so I lean toward short call verticals in those particular instruments, since I'd rather be short shares if assigned.
NASDAQ:BIDU
by NaughtyPines