I entered three positions, all of them volatility plays. They are GS, using my own analysis, and FXI and XLU, shadowing Dough.

I exited one Dough trade, IWM, shadowing the trader who initially placed it.

By Tim Bovee, Portland, Oregon, Dec. 9, 2016

Utilities Select Sector SPDR Fund (XLU)

Update 1/9/2017:  This trade, shadowing one on Dough, proved to be winner. Implied volatility fell through the period I held the position. That, combined with time decay, produced the profit.

Shares rose by 0.6% over 31 days, or a 7% annual rate. The options position prduced a 110.5% yield on debit for a +1,301% annual rate

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The trade shadows one placed by Dough trader Fauzia. Implied volatility is lower than I do with my own trades, but let’s give it a try.

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iShares China Large-Cap ETF (FXI)

Update 1/4/2016: FXI fell over the period I held this position, and as expiration approached the trend was moving toward a loss. I exited for a profit, although a slim one, of 5.1% of the maximum potential.

Shares declined by 4.9% over 26 days, or a -69% annual rate. The options position produced a 1.5% yield on debit for a +22% annual rate.

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The Goldman Sachs Group Inc. (GS)

Update 1/9/2017: GS’s implied volatility did indeed fall, although the price traded within a narrow range.The lower IV combined with the working of time decay in my favor produced a tidy profit.

GS shares rose by 0.9% over 31 days, or a +10% annual rate. The options position produced a 110.5% yield on debit for a +1,301% annual rate.

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GS has relatively high implied volatility after a sharp price rise over the past month and I’m looking for an IV reversion to the mean.

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I’ll be looking at GS as a volatility play. See Friday’s Prospects for my reasoning.

By Tim Bovee, Portland, Oregon, Dec. 9, 2016

I’ll take a look at GS as a volatility play. It stands below the 50th percentile of its annual range, but at the peak (so far) of its most recent broad movement.

I have no earnings plays coming up after the close on Friday or before the opening on Monday.

By Tim Bovee, Portland, Oregon, Dec. 8, 2016

Out of 62 earnings announced scheduled from Dec. 12 through Dec. 16, I have identified six that I shall look at further on their respective action days.

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I entered positions in FNSR and IBM, and I exited a position in COST for a loss.

By Tim Bovee, Portland, Oregon, Dec. 8, 2016

International Business Machines Corp. (IBM)

Update 1/10/2017: IBM rose to the upper boundary of its profit zone and there it stayed, fluctuating from a winning to a losing position as the stock price traded within a very narrow range. I picked a point of exit where I could get out with a profit, although a small one.

Shares rose by 0.7 over 33 days, or a +8% annual rate. The options position produced a 6.3% yield on debit for a +70% annual rate.

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This volatility play was initially crafted by Dough trader Fauzia. It breaks with my usual practice in several ways. The short call is at the money. The stock is within 60 days of earnings (on Jan. 19). Implied volatility is below the 50th percentile of the annual range.

I shall use the JAN series of options, which trades for the last time 43 days hence, on Jan. 20.

Implied volatility stands at 33%, which stands in the 32 percentile of its annual range and in the 53rd percentile of its most recent broad move. The price used for analysis was $165.70.

Iron condor, short the $165 calls and long the $175 calls,

short the $160 puts and long the $150 puts,

sold for a credit and expiring Jan. 21.

Probability of expiring out-of-the-money

JAN	Strike	OTM	Δ
Upper	165	50.4%	53
Lower	160	67%	30

The premium is $5.20, which is 52% of the width of the position’s wings.

The risk/reward ratio is 0.9:1.

Decision for My Account

I have entered a position on IBM as described above. The stock at the time of entry was priced at $165.61.

Tim Bovee, Portland, Oregon, Dec. 8, 2016

Finisar Corp. (FNSR)

Update 1/21/2017: Options remaining in my FNSR position expired today after the position was disrupted by an exercise of short put options. The overall position was slightly unprofitable.

FNSR spiked prior to its earnings announcement and then declined just as rapidly before the market close. The company published earnings after the closing bell with earnings per share that exceeded the Street estimate by 54%.

Nevertheless, the shares drifted lower, and about midway through the lifespan of the position, the short puts were exercised, putting long shares in my account. I sold the long shares, sold the accompanying long put, and allowed the remaining bear call spread, which was well out of the money, to expire worthless for maximum profit.

Shares declined by 10.9% over 43 days, or a -93% annual rate. The options position produced a 1.1% loss on debit for a -9% annual rate.

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