Many of the stocks that I like to trade are either at or near their recent highs and would be great prospects for selling naked calls against them but the seemingly perfect scenario is ruined by a couple of things.
Firstly, the market just keeps going up and doesn't seem to slowing down.
Second, the volatility is very low (under 10) on many of the stocks on my watchlist.
Both of these are surprising factors given the dim condition of not just the US economy but across the major economies around the world.
It was only yesterday when I saw a headline by Morgan Stanley that they expect the market to fall by another 20% this year.
So we have these two forces creating uncertainty amongst the traders.
The good news for options traders is that the earnings season will kick off tomorrow so we will finally see some wild moves and increased volatility.
The CPI announcement tomorrow will also potentially move the market.
For those, who are new to my daily market comments, I place and document one trade a day with the objective of helping everyone learn how to trade options.
What's my trade for today?
#FIS (#FidelityNationalInformationServices) strangle at 1 SD (standard deviation). It's a non-directional play expiring before earnings. The volatility is somewhat elevated, which is why I selected this trade.
Strangle = you sell a put and a call option expiring at the same time.
Trade Type: Short Strangle
Strike: $60 / 80
Expiry: 17 Feb
IV Rank: 57.3
Cap Req: $695
Annualised Prof at Expiration: 214%
IMPORTANT: Studying previous trades provide the opportunity to everyone to learn a great deal so I encourage you to click on the links below and digest the info.
Watch more detail here:
Let me know what you think.
This is a catch up post:
On 09/Feb I closed this deal at $1.7 for an annualised profit of 27%.
When I opened this trade the earnings was after the Feb expiration so this would have worked out nicely but now that the earnings is before the Feb expiration I was eager to get out of it.
Rolled up my put side to $65 for $0.39 credit.
Current position: Feb $65p/80c
Total credit: $1.90.