3/18 – 10:10 a.m. New York time
The final options in my SU iron fly position expired, wrapping up the position for a loss. I have updated the analysis with results.
By Tim Bovee, Portland, Oregon, March 18, 2017
The Week Ahead: Durables, houses
Big ticket purchases and the housing sales will punctuate the trading week
Durable goods orders covers purchases with a useful life of three years or more. The statistics will be published on Friday at 8:30 a.m. New York time.
The housing sales data comes in two installments: Existing homes sales, the greater part of the market, on Wednesday and new home sales on Thursday, each at 10 a.m.
Also out during the week, the Purchasing Managers Institute composite flash report on Friday at 9:45 a.m.
Live: Friday, March 17, 2017
3/17 – 3:10 p.m. New York time
I am wrapping up a very slow trading day: No new positions and no exits. I shall leave my two exit orders, on DG and CIEN, active until the closing bell, and shall update after the close if I get a fill on either.
SU’s official expiration is on Saturday, and I shall post results on that day.
Live: Thursday, March 16, 2017
3/16 – 3:20 p.m. New York time
No trades today. I’m attempting to exit CIEN at my target price and shall update this afternoon if the trade goes through before the closing bell.
ORCL Analysis
Oracle Corp. (ORCL)
Update 4/7/2017: ORCL gapped sharply to the upside immediately after earnings were published and then began a rapid decline. I exited the position at 24.7% of maximum potential profit, close to my target price.
Shares showed a net rise of 2.6% over 23 days, or a +41% annual rate. The options position produced a +32.8% yield on debit for a +520% annual rate
ORCL publishes earnings on Wednesday after the closing bell.
I shall use the APR series of options, which trades for the last time 37 days hence, on April 21.
Implied volatility stands at 20%, which is 1.8 times the VIX, a measure of the volatility of the S&P 500 index.
ORCL’s IV stands in the 36th percentile of its annual range and the 46th percentile of its most recent broad movement. Despite the fact that both metrics are below my standard, the 50th percentile, I’m proceeding with the analysis. IV is fluctuating within a narrow range and easily return to that level by the end of the day. In other words, I’m punting.
DG Analysis
Dollar General Corp. (DG)
Update 3/21/2017: DG traded sideways for two trading days after earnings were published and then declined for two more. I exited at 22.2% of maximum potential profit, ending the trade’s short lifespan.
Shares declined by 1.0% over eight days, or a -58.9% annual rate. The options position produced a 28.6% yield on debit for a +1,738% annual rate.
DG publishes earnings on Thursday before the opening bell.
I shall use the APR series of options, which trades for the last time 37 days hence, on April 21.
Implied volatility stands at 33%, which is 2.9 times the VIX, a measure of the volatility of the S&P 500 index.
DG’s IV stands in the 71st percentile of its annual range and the 73rd percentile of its most recent broad movement.
Live: Wednesday, March 15, 2017
3/15 – 1:15 p.m. New York time
I did my analyses and entry trades earlier than usual today. I shall be breaking away from the markets early to meet a commitment. The stocks analyzed are DG and ORCL. Earlier in the day I exited IONS for a profit.
I prefer to enter positions nearer to the closing bell, and especially on those days when the Federal Open Market Committee makes an announcement. I feel comfortable rushing it today because the markets have priced in a 95% chance that the fed will raise its target rate from 0.75% to 1%. Not much room for surprises.
The market’s pricing in of Fed action came from a tool posted by the derivatives markets company the CME Group.
IEF Analysis (options diagonal)
iShares 7-10 Year Treasury Bond (IEF)
On March 13 I opened a shares position on IEF (see the analysis here), based on Elliott Wave analysis indications of a reversal to the upside. To multiply potential profits from the position, I am adding an call options play structured as a diagonal spread, a close substitute for the covered call stock-options combination.
I shall use the APR series of options for the short leg, which trades for the last time 38 days hence, on April 21, and the JUN series for the long leg, which ends trading 94 days from now, on June 16.
I’ve not often used this structure, so here are the rules I’ll be using, based on those prevalent at Tastry Trade, whose trading strategies are very similar to my own. The Tasty Trade description of diagonals can be found here. Here’s what I shall be looking at:
SNAP Analysis
Snap Inc. (SNAP)
Update 4/5/2017: I have exited SNAP at 17% of its maximum potential profit, someone below my 25% profit. Why the early exit?
Many, perhaps most, non-directional trades eventually become directional, and that’s what has happened with SNAP since I entered my volatility play. For directional analysis, I turn to Elliott wave analysis.
SNAP has been traded only since March 2, so the analysis will of necessity be both piecemeal and short term. After the IPO the price shot upward and then began a decline in the standard three-wave pattern identified in Elliott as a corrective wave.
So far SNAP shows an A wave to the downside composed of five subwaves and is now tracing a B wave to the upside. It is on the second, or “b”, subwave of that movement. Afterward, it will resume its rise in a wave c of the larger scale B wave, as noted in the yellow rectangle on the chart.
I exited because wave b of B has already retraced more than half of the wave a of B rise, well satisfying the form requirement of Elliott wave analysis. I judged that evidence pointed toward an upside move sooner rather than later, and so I judged it more prudent to take the profit, thereby eliminating the risk.
Shares rose by 3.5% over 23 days, or a 56% annual rate. The options position produced a 20.2% yield on debit for a +321% annual rate
SNAP is in its ninth day of trading since its initial public offering, with the stock price showing the usual post-IPO instability.
Today is the third day that options have traded. The are quite liquid — no surprise for such a high profile offering — and today implied volatility is at the peak of the symbol’s short history and at a very high level compared to the the benchmark VIX.
I shall use the APR series of options, which trades for the last time 38 days hence, on April 21.
Implied volatility stands at 51%, which is 4.1 times the VIX, a measure of the volatility of the S&P 500 index.
SNAP’s IV stands in the 98th percentile its most recent broad movement.
Live: Tuesday, March 14, 2017
3/14 – 2:45 p.m. New York time
I entered two positions, on SNAP and IEF. I exited two positions, MYL and SGMS, each for a profit.
I have placed an exit order on IONS, but it has yet to be filled and appears unlikely to be. Nonetheless, I shall leave it active and shall update the live feed after the closing bell if it should indeed be executed.
3/14 – 12:28 p.m. New York time
I managed two positions, exiting them below my usual target of 25% of maximum profit in order to free up space in my account for other trades. Also, given the undeniable reality that time itself is risk, getting out early preserves my profits from events in an unknowable future.
The two exits were from options positions on MYL and SGMS; I shall update their analyses with results prior to the closing bell. I am attempting an early exit from IONS, so far without success.
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