July 25, 2017

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Jul 25, 2017 - Dividend. Yield (%). AAPL Apple Inc. 783. 1.68. MSFT Microsoft Corporation ... TWTR Twitter. Thu Jul-27.
 

July 25, 2017

Symbol SMH XLK OIH QQQ FXE

Description of ETF

IV Rank 65 41 36 36 28

23 15 29 15 8

1-Month Price Change 1% 2% 4% 2% 5%

Correlation with S&P 500 Strong Positive Strong Positive Weak Positive Strong Positive Weak Negative

86.7 57.35 24.88 144.23 113

Expected 30Day % Range +/- 6% +/- 4% +/- 8% +/- 4% +/- 2%

26

30

7%

Weak Positive

32.245

+/- 9%

26 22 20 16

21 13 30 10

2% -1% 10% -1%

Moderate Positive Strong Positive Weak Positive Strong Positive

39.9 80.18 9.685 55.13

+/- 6% +/- 4% +/- 9% +/- 3%

IV

Price

XRT IYR USO XLP

Semiconductor Tech Oil Services Nasdaq 100 Euro Currency Oil & Gas Explor & Product Retail U.S. Real Estate United States Oil Fund Consumer Staples

XLY

Consumer Disc.

15

12

2%

Strong Positive

91.1699

+/- 4%

XHB XBI XLV EWJ XME XLE XLI XLB EEM XLU

Homebuilders Biotech Health Care Japan Index Fund Metals and Mining Energy Select Sector Industrial Materials Emerging Index Fund Utilities 20+ Year Treasury Bond ETF Junior Gold Miners Dow Mexico Russell 2000 ETF Financial Brazil S&P 500

15 14 14 13 12 12 9 8 7 7

16 26 12 10 20 17 13 13 15 12

0% 3% 0% 0% 14% 3% 1% 4% 6% -1%

Strong Positive Moderate Positive Strong Positive Moderate Positive Moderate Positive Weak Positive Strong Positive Strong Positive Strong Positive Moderate Positive

38.61 82.0598 81.14 54.15 32.25 65.7656 68.89 55.79 43.85 52.77

+/- 5% +/- 8% +/- 3% +/- 3% +/- 6% +/- 5% +/- 4% +/- 4% +/- 4% +/- 3%

6

10

-3%

Weak Negative

124.1

+/- 3%

5 3 3 3 1 1 0

33 10 19 15 14 26 10

-3% 1% 8% 2% 5% 13% 2%

None or Very Weak Strong Positive Moderate Positive Strong Positive Moderate Positive Weak Positive Strong Positive

32.64 216.37 57.43 143.49 25.24 37.5 247.62

+/- 9% +/- 3% +/- 5% +/- 4% +/- 4% +/- 7% +/- 3%

XOP

TLT GDXJ DIA EWW IWM XLF EWZ SPY

Michael Rechenthin, PhD Kai Zeng [email protected]

 

3-Month Correlations of Price Returns One way that we seek diversification is through trading stocks with relatively low correlations.

Top 5 Dow stocks sorted by capitalization and dividend yield. A popular strategy for some readers is to sell covered calls against long stock. While any stock will work, some traders like doing this strategy on large capitalization, dividend-paying stocks, such as those in the Dow Jones. Although the payment of the dividend causes the price of the stock to (theoretically) drop by the same amount of the dividend, it does create an additional source of cash flow. Note: This shouldn't be thought of as an arbitrage strategy; buying stocks before a dividend is paid, capturing the dividend, and then selling immediately afterward, generally results in a net profit of $0.

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Description AAPL MSFT JNJ XOM JPM

Apple Inc. Microsoft Corporation Johnson & Johnson Exxon Mobil Corporation JP Morgan Chase & Co.

Description VZ CVX IBM XOM PFE

Verizon Communications Inc. Chevron Corporation International Business Machines Exxon Mobil Corporation Pfizer, Inc.

Michael Rechenthin, PhD | Kai Zeng

Market Cap (Billions) 783 567 365 339 320

Dividend Yield (%) 1.68 2.11 2.48 3.84 2.20

Market Cap (Billions) 180 196 138 339 200

Dividend Yield (%) 5.22 4.18 4.08 3.84 3.82

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Earnings trades offer investors opportunities in stocks with the largest potential of a volatility contraction the day after a company announces their quarterly earnings report. For trade ideas watch "In the Hot Seat with Pete" daily at 2:30pm CST. Symbol T AMD AKAM X KO BA F FB GILD LVS WFM GG IMAX PG VZ MA UPS DOW JCI LUV MGM TWTR INTC SBUX BIDU EA FSLR XOM CVX MRK BCS AAL PFE BP S UA AAPL HLF SPWR GRPN

Description AT&T Advanced Micro Devices Akamai Technologies United States Steel Corp. Coca-Cola Company Boeing Company Ford Motor Company Facebook Class A Gilead Sciences Las Vegas Sands Corp. Whole Foods Market Goldcorp Imax Corp. Procter & Gamble Company Verizon Communications Mastercard Incorporated United Parcel Service Dow Chemical Company Johnson Controls Southwest Airlines Company MGM Resorts International Twitter Intel Corp. Starbucks Corp. Baidu Electronic Arts First Solar Exxon Mobil Corp. Chevron Corp. Merck & Company Barclays PLC American Airlines Group Pfizer BP p.l.c. Sprint Corp. Under Armour Class C Apple Herbalife Ltd. SunPower Corp. Groupon

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Expected Date Tue Jul-25 Tue Jul-25 Tue Jul-25 Tue Jul-25 Wed Jul-26 Wed Jul-26 Wed Jul-26 Wed Jul-26 Wed Jul-26 Wed Jul-26 Wed Jul-26 Wed Jul-26 Wed Jul-26 Thu Jul-27 Thu Jul-27 Thu Jul-27 Thu Jul-27 Thu Jul-27 Thu Jul-27 Thu Jul-27 Thu Jul-27 Thu Jul-27 Thu Jul-27 Thu Jul-27 Thu Jul-27 Thu Jul-27 Thu Jul-27 Fri Jul-28 Fri Jul-28 Fri Jul-28 Fri Jul-28 Fri Jul-28 Tue Aug-01 Tue Aug-01 Tue Aug-01 Tue Aug-01 Tue Aug-01 Tue Aug-01 Tue Aug-01 Wed Aug-02

Release Time After Close After Close After Close After Close Before Open Before Open Before Open After Close After Close After Close After Close After Close After Close Before Open Before Open Before Open Before Open Before Open Before Open Before Open Before Open Before Open After Close After Close After Close After Close After Close Before Open Before Open Before Open Before Open Before Open Before Open Before Open Before Open Before Open After Close After Close After Close Before Open

Market Cap (Billions) 224.5 13.1 9.0 4.1 192.4 128.0 45.9 476.6 96.4 49.5 13.3 11.7 1.4 226.6 180.4 136.2 97.8 80.8 41.5 36.5 19.6 14.6 163.5 84.0 67.0 34.8 4.7 339.5 195.6 171.3 45.1 25.6 199.8 113.7 34.0 8.3 783.5 6.4 1.5 2.1

Michael Rechenthin, PhD | Kai Zeng

Average Volume 21,691,200 81,379,104 2,541,800 21,189,900 10,869,400 2,901,710 38,442,000 17,974,900 8,625,040 3,406,950 8,204,550 7,202,310 1,477,210 6,462,290 15,307,200 3,230,240 2,587,420 5,404,360 4,619,460 4,566,250 7,448,320 19,695,000 22,002,400 7,988,860 2,583,310 3,252,010 3,125,590 11,070,600 5,406,860 8,899,960 3,369,780 6,153,610 20,610,700 5,551,770 16,238,100 3,461,690 27,245,200 1,085,740 3,110,000 8,123,920

Weekly Options? Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

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  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. Description SIG CAG TXN MS KMI ERF BX DOW ORC EV AGNC PSEC SKT PAA EPD PBCT NRG TRGP BK TTS ALLY OHI GT PAYX O CASY CFG AES ADTN KBH WSR TK PFE

Signet Jewelers Limited ConAgra Brands Texas Instruments Morgan Stanley Kinder Morgan Enerplus The Blackstone Group L.P. Dow Chemical Orchid Island Capital Eaton Vance AGNC Investment Corp. Prospect Capital Tanger Factory Outlet Centers Plains All American Pipeline Enterprise Products Partners People's United Financial, NRG Energy Targa Resources Bank of New York Mellon Tile Shop Hldgs, Ally Financial Omega Healthcare Investors The Goodyear Tire & Rubber Paychex, Realty Income Caseys General Stores, Citizens Financial Group The AES ADTRAN, KB Home Whitestone REIT Teekay Pfizer

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Ex-Dividend Date Wed, Jul 26 Thu, Jul 27 Thu, Jul 27 Thu, Jul 27 Thu, Jul 27 Thu, Jul 27 Thu, Jul 27 Thu, Jul 27 Thu, Jul 27 Thu, Jul 27 Thu, Jul 27 Thu, Jul 27 Thu, Jul 27 Thu, Jul 27 Thu, Jul 27 Fri, Jul 28 Fri, Jul 28 Fri, Jul 28 Fri, Jul 28 Fri, Jul 28 Fri, Jul 28 Fri, Jul 28 Fri, Jul 28 Fri, Jul 28 Fri, Jul 28 Fri, Jul 28 Mon, Jul 31 Tue, Aug 01 Tue, Aug 01 Tue, Aug 01 Tue, Aug 01 Wed, Aug 02 Wed, Aug 02

Dividend Per Share 0.31 0.21 0.50 0.25 0.13 0.01 0.54 0.46 0.14 0.28 0.18 0.08 0.34 0.55 0.42 0.17 0.30 0.91 0.24 0.05 0.12 0.64 0.10 0.50 0.21 0.26 0.18 0.12 0.09 0.03 0.10 0.06 0.32

Michael Rechenthin, PhD | Kai Zeng

In Dow? Yes

In S&P 500? Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

In Russell 2000? Yes Yes Yes Yes Yes Yes -

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Below are the segments that got among the highest views per day.

Date

Segment

Title

Mon, Jul 24

Market Measures

Low VIX: Short SPY or Long VIX

Mon, Jul 24

Options Jive

ETF Portfolio Comparison

Mon, Jul 24

Best Practices

Effective Ways to Understand Delta

Fri, Jul 21

Market Measures

/VX Term Structure: Expected vs. Actual

Fri, Jul 21

tasty Extras

Ben the Intern

Fri, Jul 21

Closing the Gap - Futures Edition

Gold and Aussie Dollar Pairs Trade

Thu, Jul 20

Market Measures

Legging Out of Iron Condors

Thu, Jul 20

Trades From the Research Team LIVE

Trades From the Research Team LIVE

Wed, Jul 19

Market Measures

Economic Reports and Volatility

Wed, Jul 19

Options Jive

What's With the Low VIX?

Wed, Jul 19

Strategies for IRA

Earnings and Iron Condors

Tue, Jul 18

Market Measures

Mullet: Short Front, Long Back

Tue, Jul 18

Options Jive

China Moving Into the EEM

Tue, Jul 18

tasty BITES

Why 45 Days?

Mon, Jul 17

Market Measures

Multifactor ETFs

Mon, Jul 17

Options Jive

Leveraged ETFs: Too Much Leverage?

Mon, Jul 17

Best Practices

Earning's Season

Geeks on Parade videos are on the homepage! o o o o o

  © tastytrade.com, 2017

The Data Science Behind Financial Backtesting (Dr. Data) Vol Skew, Probability & Why Selling Excess Risk Premium Makes Money (TP) Contango & Backwardation: Opportunities in Fixed vs. Variable Cost of Carry (Pete) The Trouble with Overfit & the Advantages of Model Simplicity (Jacob) Covariance & Correlation: Origin, Understanding and Application (Jim)

Michael Rechenthin, PhD | Kai Zeng

Page 5 of 9

 

This is our broad view of the market ranging from stocks to bonds to currencies.

  © tastytrade.com, 2017

Michael Rechenthin, PhD | Kai Zeng

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  Exchange-traded funds (ETFs) are securities that trade like stock while tracking indices, commodities, bonds, and baskets of assets. We are tracking these ETFs because of the opportunity they present and the liquidity they exhibit.

  © tastytrade.com, 2017

Michael Rechenthin, PhD | Kai Zeng

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  These are a few of the individual stocks that we have on our radar. Always be aware of expected earning date when choosing your expiration. Individual stocks do have more risk of sudden moves - make sure you are compensated for the risk.

  © tastytrade.com, 2017

Michael Rechenthin, PhD | Kai Zeng

Page 8 of 9

 

Reading this Report Expected Range Cone. The following pages show stocks and ETFs that the tastytrade Research Team currently find have relatively high or low volatility. 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.

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. 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 parethesis, is BTO or AMC; "Before the Open" or "After Market Closes", respectively. Upcoming earnings dates do sometimes change.

Disclosures tastytrade content is provided solely by dough, Inc., and is for informational and educational purposes only. All volatility, probability, liquidity and correlation numbers are purely theoretical in nature, and are for illustrative purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures, transaction or investment strategy is suitable for any person. Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. tastytrade or its parent, dough, Inc., does not provide investment or financial advice or make investment recommendations, nor is either in the business of transacting trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives.

  © tastytrade.com, 2017

Michael Rechenthin, PhD | Kai Zeng

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