I watched a post debate panel this morning and the one big take away after hearing comments from undecided voters from both sides of the isle was that people are sick and tired of the non-stop drama. Exhaustion runs high and if there is one sentiment that everybody shared is that they just want to get back to work and their respective lives for that matter.

Maybe that explains the comparatively chill gyrations I keep seeing in equities over the past week or so. Expected move is mostly being observed except for week #41 – which however based on the stats I posted that week had the highest weekly stdev and trading range of the entire year.

If you would listen to any of the political pundits – no matter from which side – life in America will not be the same after November 3rd and that’s the best case scenario. Most of that is most likely political hyperbole but what I do suspect is that big tech’s future will be intrinsically linked to whoever is going to be the 46th president of these United States.

At this point my composite index appears to be pretty optimistic. And maybe for a reason as – regulations or not – I have grave doubts that DJT would be foolish enough to take down what effectively is the highest performing sector of the entire S&P 500.

Until all that plays out however it’s still earnings week and just like last time I’ve run my handy Finviz parser and then imported it into TOS in order to sort the results by IVZ-Score (on the left) as well as by volume (on the right).

With an IVZ-Score of 1.48 FSLR is high on my list. And given that it usually swings for the fences not just surviving but profiting from earnings announcements takes a bit of finesse. Basically there are two ways to slay this beast:

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For starters what we’ll need is a contract as well as its implied volatility. I’ve chosen the October 30th expiration which currently shows an EM of about 8 handles. As FSLR was trading at around 84 at the time this puts my upper EPT at 92 and the lower at 76 – I have created price slices for you to make things a bit more clear.

Now this the high probability strategy: Odds of making 1 penny or more is 52% and as you can see the win and the loss are pretty evenly balanced. All I really did here was to place the long strikes a little ahead of the respective EPTs.

The basic idea here of course is that FSLR will overshoot – either to the up or downside.

And here is the low probability strategy: My main criteria for placing this one was a delta of about 10 – plus minus – on my long strikes. Then I did my best to select available short strikes which was a bit tougher on the long side, which the main reason it’s slightly shifted.

But that implicitly tells us something. With the market currently trading near 84 WHY is the call strike with a 10 delta much further out than the short strike with a delta of 10?

You probably guessed it – the market is expecting FSLR to surprise to the upside and is pricing OTM call options at a premium. That’s also referred to as IV SKEW and it’s a concept I have covered here on several occasions over the past few years.

So if nothing else you learned something important today, which is that you can gauge the market’s expectations on earnings by the way it skews the option chain.

Anyway, the odds on this campaign are only 9.6% – a.k.a a Hail Mary pass. If it hits you will bank some mighty coin. If not well, let’s not forget that there will 3 days until expiration until earnings day. Which means you will most likely be able to recover significant residual value due to theta.

All in all – both campaigns are worth exploring and I’ll probably take out a bit of both.

Happy hunting but keep it frosty.

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