Saturday, June 18, 2016

Monday's Prospects

On Friday, June 17:

Of 461 large-cap stocks and exchange-traded funds in my analytical universe,  five meet my criteria for further consideration. I already hold positions in two of them.

There are no prospects for trades coinciding with earnings announcements.

I shall do further analysis on Monday, June 20.

The next earnings season will begin on July 11 and last for six weeks, through Aug. 19.

The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War
by Robert J. Gordon

Symbols meeting or close to meeting implied volatility criteria

IV qualifies


In portfolio


HSBC's implied volatility is in the 80th percentile of its most recent range following a sharp rise over the last few days. The company is a London-based bank, and I attribute the IV rise to the vote next week, on Thursday, on whether the United Kingdom should exit the European Union, known as Brexit.

Two exchange-traded funds on my list are impacted by the Brexit vote: The German stocks fund EWG and the global developed-economies stocks fund EFA. Both continue to show extremely high implied volatility.

I intend to begin analysis and possibly trades in the three symbols on Monday, although I reserve the option to delay until Tuesday depending upon the state of the market on those days.

One wrinkle on EWG. Some symbols don't have options series for every month of the year. My current options are the AUG series, which complete trading on Aug. 19. EWG lacks that series; the other two symbols on my EU list do have AUG options.

I select my current series so that the expiration is 30 calendar days or more away. This ensures an optimal balance between the benefits of time decay on my short positions and sufficiently high premium to make the trade worthwhile.

On Monday the AUG options will be 60 days from expiration, and the JUL options 25 days. For EWG, however, the next options series is those expiring in October, with 123 days to trade.

October is too far out. So in the case of EWG my choices are these: Accept lower premium by trading the JUL series or disqualify the symbol as lacking a usable options series.

The short calendar for EWG does argue for trading that symbol on Monday rather than waiting for Tuesday, to gain an extra day's worth of premium on the JUL series as time decay does its inexorable work. I'll make the decision on EWG on Monday.


The stocks in my analytical universe all have analyst coverage through the stock-ranking company Zacks Investment Research. Not all of the exchange-traded funds are so covered.

I screen for 1) suitability of the options grid, including open interest of three figures or greater on the strike prices I would need to use to build a position and 2) the absence of an earnings announcement within the lifespan of the like options series I would trade, 3) implied volatility in the 60th percentile or greater of its most recent range, 4) average volume of 3 million shares a day or greater, and 5) a price of $20 or greater.

-- Tim Bovee, Portland, Oregon, June 18, 2016


Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

I can be reached via comments on Private Trader posts or by email at


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Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

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