February 13, 2018

February 13, 2018 Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest.

Fear Means Opportunity.

You might consider one of the following trades. Each one will have different theoretical probabilities of success and require different buying power requirements (based on a margin account). If you are Bullish the S&P 500… • You might consider selling an out-of-the-money SPY Put at 250 in March for a 79% probability of profit at expiration and require roughly $3,900 of buying power. • Or you might consider buying 100 shares of SPY and selling a near out-of-the-money call in March at a strike of 268. This would have a 55% probability of profit at expiration and require roughly $12,850 of buying power. If you are Super Bullish the S&P 500… • You might consider selling a put in SPY closer to at-the-money (for example, sell a 260 strike). This would have a 65% probability of profit at expiration and require roughly $4,890 of buying power. All using the March expiration. • Or there is also nothing wrong with going slightly in-the-money on the put….for example selling a 267 strike. The downside is liquidity can get worse and you would be getting less extrinsic value. This would have greater upside potential though if the S&P 500 rises by a greater amount. If you are Neutral the S&P 500… • You might consider selling a March strangle in SPY with a short 243 put and a short 276 call. This would require roughly $4,075 of buying power and have a 65% probability of profit by expiration. • Or you might also consider an iron condor in SPY. This is the same as the strangle with the exception of also being long the 238 and 281 put and call respectively. This would require less capital (roughly $408) and have a 60% probability of success at expiration. If you are Bearish the S&P 500… • You might consider skewing a strangle to the downside. For example, selling a March expiration put at 244 and a call at 271 for a 60% probability of success and roughly $4,590 of buying power.

Research is Expanding!

Wanna be part of the tastytrade thinktank? Send your resume to Kai — [email protected]. Michael Rechenthin, PhD James Blakeway Kai Zeng [email protected]

Popular ETFs DIA EEM EFA EWZ FEZ FXI GDX GDXJ GLD IWM KRE OIH QQQ SLV SPY TLT XBI XLB XLE XLF XLI XLK XLP XLU XME XOP XRT

Dow Jones Emerging Index Fund MSCI EAFE Brazil Euro Stoxx 50 China Large Cap Gold Miners Junior Gold Miners Gold Russell 2000 ETF Regional Banking Oil Services Nasdaq 100 Silver S&P 500 20+ Year Treasury Bond ETF Biotech Materials Energy Select Sector Financial Industrial Tech Consumer Staples Utilities Metals/Mining Oil & Gas Exploration Retail

© tastytrade.com, 2018

Michael Rechenthin, PhD | James Blakeway | Kai Zeng

Page 2 of 8

Upcoming Earnings Weekly Options

In Dow?

In S&P 500?

In Russell 2000?

In tastytrade Watchlist?

After Close

Yes

-

-

Yes

-

Tue Feb-13

After Close

Yes

-

-

-

Yes

Groupon

Wed Feb-14

Before Open

Yes

-

-

Yes

-

Goldcorp

Wed Feb-14

After Close

Yes

-

-

-

Yes

CSCO

Cisco Systems

Wed Feb-14

After Close

Yes

Yes

Yes

-

-

SPWR

SunPower

Wed Feb-14

After Close

Yes

-

-

Yes

-

AMAT

Applied Materials

Wed Feb-14

After Close

Yes

-

Yes

-

-

NTAP

NetApp

Wed Feb-14

After Close

Yes

-

Yes

-

-

SHAK

Shake Shack

Thu Feb-15

After Close

Yes

-

-

Yes

-

DE

Deere &

Fri Feb-16

Before Open

Yes

-

Yes

-

-

KO

Coca-Cola

Fri Feb-16

Before Open

Yes

Yes

Yes

-

-

Symbol

Description

Expected Report Date Time of Day

FOSL

Fossil Group

Tue Feb-13

BIDU

Baidu

GRPN GG

MOS

Mosaic

Mon Feb-19

After Close

Yes

-

Yes

-

-

WMT

Walmart

Tue Feb-20

Before Open

Yes

Yes

Yes

-

-

HD

Home Depot

Tue Feb-20

Before Open

Yes

Yes

Yes

-

Yes

RIG

Transocean

Tue Feb-20

After Close

Yes

-

Yes

-

Yes

Historical Earnings Moves for Select Stocks

It is often nice to examine historical moves in stocks around earnings. At the very least, it provides some context.



Page 3 of 8

Stocks and ETFs with an upcoming dividend. In the money short call options are the only options at risk of additional early assignment due to the dividend. If the extrinsic value of the in the money short call is less than the dividend, the option is at (a greater than average) risk of being assigned.

In Russell 2000?

In tastytrade Watchlist?

Yes

-

-

-

Yes

-

-

0.40

-

Yes

-

-

$

0.56

-

Yes

-

-

Wed, Feb 14

$

0.31

-

Yes

-

-

Microsoft

Wed, Feb 14

$

0.42

Yes

Yes

-

Yes

UN

Unilever NV

Thu, Feb 15

$

0.38

-

-

-

-

UTX

United Technologies

Thu, Feb 15

$

0.70

Yes

Yes

-

-

Visa

Thu, Feb 15

$

0.21

Yes

Yes

-

-

CVX

Chevron

Thu, Feb 15

$

1.12

Yes

Yes

-

-

COST

Costco Wholesale

Thu, Feb 15

$

0.50

-

Yes

-

Yes

DUK

Duke Energy (Holding)

Thu, Feb 15

$

0.89

-

Yes

-

-

MMM

3M

Thu, Feb 15

$

1.36

Yes

Yes

-

-

UPS

United Parcel Service

Fri, Feb 16

$

0.91

-

Yes

-

-

SYMC

Symantec

Fri, Feb 16

$

0.08

-

Yes

-

-

TGT

Target

Tue, Feb 20

$

0.62

-

Yes

-

-

IP

International Paper

Tue, Feb 20

$

0.48

-

Yes

-

-

AMAT

Applied Materials

Tue, Feb 20

$

0.10

-

Yes

-

-

SYMC

Symantec

Wed, Feb 21

$

0.08

-

Yes

-

-

TRI

Thomson Reuters Corps

Wed, Feb 21

$

0.35

-

-

-

-

MAR

Marriott International (Class A)

Thu, Feb 22

$

0.33

-

Yes

-

-

DAL

Delta Air Lines

Thu, Feb 22

$

0.31

-

Yes

-

-

GE

General Electric

Fri, Feb 23

$

0.12

Yes

Yes

-

-

JNJ

Johnson & Johnson

Mon, Feb 26

$

0.84

Yes

Yes

-

-

Description

WYNN

Wynn Resorts, Limited

Wed, Feb 14

$

0.50

-

Kroger

Wed, Feb 14

$

0.13

WBA

Walgreens Boots Alliance

Wed, Feb 14

$

LLY

Eli Lilly and

Wed, Feb 14

TJX

TJX Companies

KR

MSFT

V

Ex-Dividend Date

Dividend Per In S&P In Dow? Share 500?

Symbol

Note: DIA — Dow Jones Industrial ETF has $0.14 dividend with an Ex-Dividend date of Friday, February 16.



Page 4 of 8

30-Day Expected Range Plots — The colored cone represents a 30-day expected theoretical price range that is calculated from the options’ implied volatilities. In theory, we expect that prices will stay, with a 68% probability, within the boundary of the cone.



Page 5 of 8




Page 6 of 8




Page 7 of 8

Reading this Report Expected Range Cone. The colored cone represents a 30-day expected theoretical price range that is calculated from the options’ implied volatilities. If the implied volatility is relatively high, then the market is expecting a larger price change in the underlying stock or ETF. From this we can derive the market’s 1 standard deviation theoretical expectation of where prices might be in the future. In other words, the market is expecting, with a 68% theoretical probability, that prices will fall within the boundary of the cone at the end of 30 days. Cone Color. The color of the cone is significant. The darker the color, the more “extreme” the implied volatility (IV) which is represented by implied volatility rank (IV Rank). This information can help you decide on a trading strategy.

IV Rank near 100%

Glossary IV. Implied Volatility is the estimated volatility of a security’s price derived from its option price; the higher the IV, the more expensive the option and therefore the larger the expected price move. IV is an annualized number of volatility, e.g. a IV of 27 means the option’s market is pricing in an annualized price range, either plus or minus, of 27%.

IV Rank near 0%

IV Rank. IV by itself doesn’t tell us if if the volatility is high or low - but IV Rank does. An IV Rank of 70 means that the IV is 70% between its low and high IV over the past year. The higher the IV Rank, the higher the security’s IV is compared to its past year. We provide six levels to make evaluating easier: • Extremely High: IV Rank between 90 and 100 • High: IV Rank between 75 and 90 • Moderately High: IV Rank between 50 and 75 • Moderately Low: IV Rank between 25 and 50 • Low: IV Rank between 10 and 25 • Extremely Low: IV Rank between 0 and 10 Option Liquidity. At tastytrade we have our own theoretical measure of option liquidity, Poor, Moderate, Good, or Great. It examines the options’ bid/ ask spread, open interest, and the number of strikes with non-zero bids. Correlation with S&P 500. Correlation is a statistical measure of how strong a relationship two securities have with one another. A correlation of -1 means the stocks are perfectly negatively correlated (they move in opposite directions), while a correlation of +1 means the stocks are perfectly positively correlated (they move in the same direction). A correlation of 0 means there exist little relationship. Earnings. The earnings date of the security. In practice we tend to see stocks have a larger amount of implied volatility (IV) nearer to earnings as the market is pricing in the fear of the upcoming earnings announcement. In parenthesis, is BTO or AMC; "Before the Open" or "After Market Closes", respectively. Upcoming earnings dates do sometimes change.

Disclosures Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options: https://www.theocc.com/components/docs/riskstoc.pdf tastytrade content is provided solely by tastytrade, Inc. and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. tastytrade, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastytrade is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. Multi-leg option strategies incur higher transaction costs as they involve multiple commission charges. tastytrade is not a licensed financial advisor, registered investment advisor, or a registered broker-dealer. Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options. Futures accounts are not protected by the Securities Investor Protection Corporation (SIPC). All customer futures accounts' positions and cash balances are segregated by Apex Clearing Corporation. Futures and futures options trading is speculative and is not suitable for all investors. Please read the Risk Disclosure for Futures and Options prior to trading futures products found in Disclosures under the Documents tab. © tastytrade.com, 2018


Page 8 of 8