In Journal on January 10, 2016 at 18:33
Link: Weekly Watchlist
This uptick in volatility isn’t over. I’m pretty confident things will settle down in the next two weeks and I expect to sell a few more calls and puts. That doesn’t mean I think US equities will recover near the highs, however. I’m not as concerned with where price is as much as where volatility is.
My main preoccupation at the moment is crude oil and energy stocks. The energy complex hasn’t bottomed yet, but there is enough premium out there to start engaging from the put side at good prices, IMO. (From both sides, actually.) My bias in crude is bearish to neutral, with reversion to mean within the descending channel — obviously the price swings will be wide.
There are several overextended equities and ETFs that may present opportunities. There are several more that show good odds of a contractionary range — or at any rate, a less volatile month ahead.
In addition the equities and ETF options, I am looking to short the euro again but higher than last time. I will also be looking for opportunities to fade extreme daily moves in ES futures — at the right levels.
That’s the plan, anyway. Already up 1% for the year despite a few questionable spreads. Fortunately didn’t get goosed in SCTY or CMG. Could be better, but still not too shabby.
In Journal on December 23, 2015 at 18:13
Tonight’s scan within the static watchlist. Out of more than 120 issues, just 15 came up. Two are in my portfolio for January, with one in February — the only one so far. I need to beef up the February portfolio soon and should probably add new stocks to the list to increase the selection pool. (Any ideas?)
As mentioned, I have trades in three of these issues: APC (strangle), BBY (strangle), and SCTY (strangle, inverted). January began as a light month with 14 positions. After the sharp drop in implied volatility, only eight remain with just 23 days to expiration. I highly doubt I will be trading anymore January options….
WYNN, EA, LULU and TWTR look interesting, but unfortunately the model doesn’t like any of them.
EA has an 80% chance of an expansion and ZERO chance of a contraction… obviously not ideal, but it looks outstanding on the chart. If the model projects a contraction next week and the monthly odds look good, I’ll play. Even better if EA shows some extension that I can fade.
LULU has a 70% chance of an expansion for the next week. Technically, this price action needs to develop a bit more before I can take a view but I’m watching the space between 55 and 6o. Seems like it needs to fill in more with resistance at 55 being key here. (Captain Obvious speaking.)
TWTR from the short side. Waiting until I get a contractionary signal, then a bear call spread if implied volatility is still high enough.
WYNN is ready for either a directional move or a head-fake. Pattern odds on the bear pennant say a continuation downward but it looks oversold to me. I’m thinking a pop up that fakes everyone out and then a dip back into the range. I’ll probably put on a bear call spread if I catch the price action in time.