Shorting Vol on retail

xandman

xandman

Now may be a good time to short vol on Retail earnings. I am selling a few straddles in TJX, BBY, DKS. I suspect it has moved ahead of itself. However, I have included a short equity kicker to keep the Pnl up over the potential/expected down moves. Obviously, I get killed on a strong upward move.

Anybody have other thoughts/candidates?
 
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xandman said:
Now may be a good time to short vol on Retail earnings. I am selling a few straddles in TJX, BBY, DKS. I suspect it has moved ahead of itself. However, I have included a short equity kicker to keep the Pnl up over the potential/expected down moves. Obviously, I get killed on a strong upward move.

Anybody have other thoughts/candidates?
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Excuse my ignorance on options but are you delta hedging. Otherwise doesnt it become more of a directional trade.
 
xandman said:
Now may be a good time to short vol on Retail earnings. I am selling a few straddles in TJX, BBY, DKS. I suspect it has moved ahead of itself. However, I have included a short equity kicker to keep the Pnl up over the potential/expected down moves. Obviously, I get killed on a strong upward move.

Anybody have other thoughts/candidates?
More...
If you shorted vol at 11 AM yesterday, you deserve a Nobel Prize in Economics. I'm talking just SPX, not your particular names per say, but still, nice if not ballsy timing. Are the shorts delta hedging, because I'm not necessarily sure that would make sense in this situation given what you've discussed, isn't that adding to your delta exposure? I really have no idea what strikes you're using or anything though.
 
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I've caught much more hair raising turns for index vol before, but I don't think I can make a living doing that.

I find it is much easier to tweak the the delta and PnL with underlying than to model different straddles separately. It lifts the left side of the PnL parabola making it closer to a short call PnL profile that has a pronounced belly when vol drops. Using at or near ATM strikes, not much drift in the underlying prior to earnings.
 
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GMCR looks like a nice candidate with a strong short bias. A potential $10 move to the downside. I can't imagine more than a $4 move up.
 
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