The big-box discount retailer Wal-Mart Stores Inc. (WMT), headquartered in Bentonville, Arkansas, publishes earnings on Thursday, Feb. 19, prior to the opening bell.
The stock has Weeklys among its options inventories, and I shall use the FEB4 series of options, which trades for the last time on Feb. 27, nine days hence.
[WMT in Wikipedia]
WMT
Analyst opinion and the chart give WMT a slightly bearish score, -0.4 on my scale running from -1 to +1. Over the past year earnings announcements have split evenly, two producing higher prices five days after publication and two lower prices.
 |
| WMT @11:10 a.m. New York time, 30 days hourly bars |
Ranges
Click on chart to enlarge.
Implied volatility stands at 21%, in the 73rd percentile of the prior rise.
| Week | SD1 68.2% | SD2 95% | Chart |
|---|---|---|---|
| Upper | 88.80 | 91.65 | 88.00 |
| Lower | 83.11 | 80.26 | 83.93 |
| Gain/loss | 3.1% | 6.6% |
The Trade
short the $83 puts and long the $81 puts
sold for a credit and expiring Feb. 28
Probability of expiring out-of-the-money
| FEB4 | Strike | % |
|---|---|---|
| Upper | 88 | 77 |
| Lower | 83 | 77 |
The risk/reward ratio stands at 3:1.
Decision for My Account
I've opened on iron condor on WMT as described above.
-- Tim Bovee, Portland, Oregon, Feb. 18, 2015
References
My volatility trading rules can be read here. For a discussion of the rationale behind the rules, see my essay, "Rules for very short term trades".
The directional score is calculated as the sum of the following:
- Zacks rating --The Zacks ratings are translated as follows: 1=2, 2=1, 3=0, 4=-1 and 5=-2.
- Enthusiasm rating --: A single percentage derived from the number of analysts whose opinions are in one of five categories: Strong buy, buy, hold, sell and strong sell.
- Strong buy share -- The percentage of all analysts who rank the stock strong buy. If the share is 60% or greater, the score is 1; if 40% or less, then the score is -1; otherwise, the score is zero.
- Ethusiasm momentum -- The score is 1 if today’s enthusiasm rating is larger than the rating 30 days earlier; otherwise, the score is zero.
- 30-day direction -- The trend that best describes the 30-day chart: 1 for an uptrend, -1 for a downtrend and zero for a sideways trend.
- One-day direction -- The trend that best describes the one-day chart: 1 for an uptrend, -1 for a downtrend and zero for a sideways trend.
Elliott wave analysis tracks patterns in price movements. The principal practitioner of Elliott wave analysis is Robert Prechter at Elliott Wave International. His book, Elliott Wave Principle, is a must-read for people interested in this form of analysis, as is his most recent publication, Visual Guide to Elliott Wave Trading.
Several web sites summarize Elliott wave theory, among them, Investopedia, StockCharts and Wikipedia.
Alerts
Two social media feeds provide notification whenever something new is posted.
- On Twitter, Follow Tim Bovee: https://twitter.com/TimBovee
- On Facebook, Like Private Trader: https://www.facebook.com/PrivateTrader
Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.License
All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Based on a work at www.timbovee.com.
No comments:
Post a Comment