7/6 – 3:20 p.m. New York time
I neither entered nor exited positions today. I have placed two orders to exit at my target prices for XLK and KBH, neither of which has been filled with 40 minutes to go before the closing bell. If either is filled, I shall update the analysis with results after the market close.
Yum China Holdings Inc. (YUMC)
Update 7/24/2017: YUMC gapped downward after earnings were published and quickly returned to about the midpoint of the gap, making the position profitable. I exited at 8% of maximum potential profit, below my 25% target, well before expiration to clear my account for other trades.
Shares declined by 6.3% over 19 days, or a -120% annual rate. The options position produced an 8.9% yield on debit for a +170.8% annual rate.
YUMC publishes earnings on Wednesday after the closing bell.
I shall use options that trade for the last time 16 days hence, on July 21.
Implied volatility stands at 41%, which is 3.6 times the VIX, a measure of the volatility of the S&P 500 index.
YUMC’s IV stands in the 16th percentile of its annual range, due to an initial public offering spike last November, and the 91st percentile of its most recent broad movement.
SPDR S&P Retail (ETF) (XRT)
Update 7/14/2017: I exited XRT in order to clear space for the more profitable earnings plays. I exited at 12.0% of maximum potential profit, well below my 25% goal but profitable all the same.
Shares declined by 1.2% over nine days, or a -50% annual rate. Te options position produced a 13.6% yield on debit for a +551.94% annual rate.
XRT has sufficiently high implied volatility relative to its most recent and annual ranges to qualify as a direction-neutral trade.
I shall use options that trade for the last time 44 days hence, on Aug. 18.
Implied volatility stands at 20%, which is 1.7 times the VIX, a measure of the volatility of the S&P 500 index.
XRT’s IV stands in the 46th percentile of its annual range and the 76th percentile of its most recent broad movement.
SPDR S&P Biotech (ETF) (XBI)
Update 7/17/2017: XBI has traced a sideways pattern since I entered the position. Although options expiration is a month away, I exited to make room in my account for earnings plays, which tend to be higher velocity and more profitable. I exited at 12.3% of maximum potential profit, about half of my 25% target.
Shares rose by 0.5% over 12 days, or a 15% annual rate. Tye options position produced a 14.0% yield on debit for a +426% annual rate.
XBI has sufficiently high implied volatility relative to its most recent and annual ranges to qualify as a direction-neutral trade.
I shall use options that trade for the last time 44 days hence, on Aug. 18.
Implied volatility stands at 30%, which is 2.5 times the VIX, a measure of the volatility of the S&P 500 index.
XBI’s IV stands in the 27th percentile of its annual range and the 91st percentile of its most recent broad movement.
The week will come in with a whimper — a shortened trading day on Monday and no trading on Tuesday — and go out with a bang — the monthly jobs report and the Federal Reserve’s semiannual monetary policy report to Congress.
The occasion for the slow start is the Independence Day holiday in the United States. On Monday stock markets will close early, at 1 p.m. New York time and on Tuesday they will be shuttered, with normal hours resuming on Wednesday.
Monday will be punctuated by the Institute of Supply Management manufacturing survey at 10 a.m.
The employment situation numbers will be published on Friday at 8:30 a.m. A preview of the numbers will be provided with the private-sector ADP employment report on Thursday at 8:15 a.m.
The Fed’s release of the monetary policy report to Congress on Friday marks a break with the usual practice, which is to time the release to Fed Chair Janet Yellen’s testimony before congressional committees. Instead, the release is coming five days before she testifies.
The Fed said it altered the schedule to allow Congress and the public time to review the report ahead of her testimony. Does the switch signal something out of the ordinary in the report, requiring additional review? The Fed isn’t saying.
Tim Bovee, Private Trader 