Trade Ideas | March 21, 2018
As I said yesterday, volatility across the market remains muted. I found a couple of good ideas yesterday for short IV positions, today I'm looking at some ideas for long IV positions:
$EWZ: I'm looking to sell an Iron Condor today in the emerging markets ETF, $EEM. I figured it might be a decent idea to offset the short IV positioning in that ETF with a long IV positioning in $EWZ, the Brazil ETF, while still remaining delta neutral. That means I'm looking to trade the Apr/May 44 put calendar, currently trading for around 0.55 - 0.60. This position would profit if $EWZ continues to trade in the range that it has been for the better part of 2018 and/or if IV rises. With IV in $EWZ in the 23rd percentile, I think there's a decent chance that it will rise.
$GLD: Another put calendar for the gold ETF, the Apr/May 125 put calendar, currently trading for around 0.50. Like the $EWZ calendar, this position profits if $GLD remains in the 2018 trading range and/or if IV rises (IV in 18th percentile currently).
The thing about calendar spreads is that they are "slow moving," meaning that it takes quite a large move in the underlying for the position to start losing a lot proportional to its risk. If I get into these positions and in two weeks decide that I don't like them anymore, I can probably escape with a scratch. When IV is low, it of course means that the underlying price is not likely to move around a whole lot - but that can change in an instant as we saw in early February.
I may or may not put these ideas into action but with IV down across the market, I'm just trying to find quality opportunities to get long IV and remain neutral on direction.