Tim Bovee, Private Trader: INTC, DAL Analysis

Tuesday, April 14, 2015

INTC, DAL Analysis

Update 4/25/2015: INTC expired without value for maximum gain. Shares rose by 0.6% o ver the days, or a 22% annual rate. The options position produced a 100.0% yield on debit, for a +3,650% annual rate.

Update 4/22/2015: I closed DAL for a loss a few days prior to expiration. Shares rose by 8.1% over the eight-day lifespan of the position, for a +369% annual rate. The options position produced a -84.6% loss on debit, for a -3,661% annual rate.

The semiconductor manufacturer Intel Corp. (INTC), headquartered in Santa Clara, California, and the railroad CSX Corp. (CSX), headquartered in Jacksonville, Florida, publish earnings after the closing bell on Tuesday, and Delta Air Lines Inc. (DAL), headquartered in Atlanta, Georgia, publishes prior to the opening bell on Wednesday.

The goal of my trades is to construct a direction-neutral position 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.

I shall use the APR4 Weeklys series, which completes trading on April 24, 10 days from today.

[INTC, CSX, DAL, in Wikipedia]

INTC

Ranges

Click on chart to enlarge.

IBM at 9:42 a.m. New York time, 30 days hourly bars

Implied volatility stands at 29.4%, which is 2.1 times the VIX, a measure of volatility of the S&P 500 index. !INTC’s volatility stands in the 49th percentile of its most recent rise.

Ranges implied by options and the chart

Week	SD1 68.2%	SD2 95%	Chart
Upper	32.60	33.44	32.05
Lower	30.90	30.06	30.45
Gain/loss	2.7%	5.3%

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

Iron condor short the $33 calls and long the $33 calls,
short the $30.50 puts and long the $29.50 puts
sold for a credit and expiring April 25
Probability of expiring out-of-the-money

APR4	Strike	OTM
Upper	33	75.2%
Lower	30.5	77.2%

The risk/reward ratio stands at 1.9:1. The premium is $0.33 ($0.19 for the calls and $0.14 for the puts).

DAL

Ranges

Click on chart to enlarge.

DAL at 9:55 a.m. New York time, 30 days hourly bars

Implied volatility stands at 42.3%, which is 3 times the VIX, a measure of volatility of the S&P 500 index. DAL’s volatility stands in the 99th percentile of its most recent rise.

Ranges implied by options and the chart

Week	SD1 68.2%	SD2 95%	Chart
Upper	44.40	44.04	43.97
Lower	41.12	39.48	41.02
Gain/loss	3.8%	7.7%

Implied volatility 1 and 2 standard deviations; chart support and resistance
The Trade
Iron condor short the $45 calls and long the $46 calls,
short the $41 puts and long the $40 puts
sold for a credit and expiring April 25
Probability of expiring out-of-the-money

APR4	Strike	OTM
Upper	45	79,5%
Lower	41	73.0%

The risk/reward ratio stands at 1.3:1. The premium is $0.39 ($0.16 for the calls and $0.23 for the puts).

Decision for My Account

I've opened positions in INTC and DAL as described above.

-- Tim Bovee, Portland, Oregon, April 14 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.