Tim Bovee, Private Trader: C, GS Analysis

Wednesday, April 15, 2015

C, GS Analysis

Update 4/25/2015: C and GS expired without value.

C shares declined by 0.2% over nine days, or a -21% annual rate. GS shares declined by 2.0% o \ver nine days, or a -79% annual rate.

Options positions on each produced a 100.0% yield on debit, for a +4,056% annual rate.

Update: 4/15/2015: My order to open a position in GS was filled. See the GS section below and the Decisions section for changes.

The financial services holding company Citigroup Inc. (C) and the investment bankers Goldman Sachs Group Inc. (GS), both headquartered in New York City, publish earnings on Thursday prior to the opening bell.

I shall use the APR4 series of options, which trades for the last time eight days hence, on April 24.

The goal of my trades is to construct direction-neutral positions with a zone of profitability at expiration covering all of the one standard deviation range implied by volatility and options pricing, or the 30-day hourly chart support and resistance range, whichever is wider.

[C, GS in Wikipedia]

C

Ranges

Click on chart to enlarge.

C at 11:17 a.m. New York time, 30 days hourly bars

Implied volatility stands at 22.1%, which is 1.7 times the VIX, a measure of volatility of the S&P 500 index. C’s volatility stands in the 26th percentile of its most recent rise.

I've used the alternate support level set April 14 for the lower boundary of the chart range.

Ranges implied by options and the chart

Week	SD1 68.2%	SD2 95%	Chart
Upper	54.93	56.68	54.72
Lower	51.45	49.70	52.38
Gain/loss	3.3%	6.6%

Implied volatility 1 and 2 standard deviations; chart support and resistance
The Trade

The price is showing a strong upward bias and I have favored the upside of the proposed position.

Iron condor short the $55 calls and long the $56 calls,
short the $52 puts and long the $51 puts
sold for a credit and expiring April 25
Probability of expiring out-of-the-money

APR4	Strike	OTM
Upper	55	81.3%
Lower	52	70.1

The risk/reward ratio stands at 2.1:1. The premium is $0.30 ($0.12 for the calls and $0.18 for the puts).

GS

Ranges

Click on chart to enlarge.

GS at 11:48 a.m. New York time, 30 days hourly bars

Implied volatility stands at 20.9%, which is 1.6 times the VIX, a measure of volatility of the S&P 500 index. GS’s volatility stands in the 27th percentile of its most recent rise.

I've used the alternate support level set April 13 for the chart support.

Ranges implied by options and the chart

Week	SD1 68.2%	SD2 95%	Chart
Upper	204.96	211.12	199.71
Lower	192.64	186.48	195.23
Gain/loss	3.1%	6.2%

Implied volatility 1 and 2 standard deviations; chart support and resistance
The Trade

This proposed trade uses chart support for the lower boundary and the one standard deviation range for the upper boundary.

Iron condor short the $205 calls and long the $207.50 calls,
short the $195 puts and long the $192.50 puts
sold for a credit and expiring April 25
Probability of expiring out-of-the-money

APR4	Strike	OTM
Upper	205	82.8%
Lower	195	70.0%

The risk/reward ratio stands at 1.8:1. ~~Because of the bid/ask spread, I was unable to get a fill on my trade without pushing the risk/reward ratio higher than I like.~~

The premium is $0.90 ($0.69 for the calls and $0.21 for the puts).

Decision for My Account

I've opened a position on C as described above. I have been unable to open a position on GS at an acceptable risk/reward ratio. I shall update this post if I succeed in getting a fill on the order at a price that I can accept.

I've opened positions on C and GS as described above.

-- Tim Bovee, Portland, Oregon, April 15, 2015

References

My volatility trading rules can be read here.

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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.