Shared lost 0.6% over one day, or a -212% annual rate. The otpions position produced a 76.8% yield on debit, for a +27,6752% annual rate.
True, I could have held on for a week plus change until expiration, and perhaps have pocketed a 100% profit. But why the take risk?
The networking equipment company Cisco Systems Inc. (CSCO), headquartered in San Jose, California, publishes earnings Wednesday after the closing bell.
I shall use the MAY4 Weeklys series of options, which trades for the last time nine days hence, on May 22.
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.
[CSCO in Wikipedia]
Click on chart to enlarge.
|CSCO at 11:45 a.m. New York time, 90 days two-hour bars|
|Week||SD1 68.2%||SD2 95%||Chart|
short the $28 puts and long the $27 puts
sold for a credit and expiring May 23
Probability of expiring out-of-the-money
The risk/reward ratio stands at 1.9:1. The premium is $0.33 ($0.17 for the calls and $0.16 for the puts).
Decision for My Account
I've opened an account on CSCO as described above.
-- Tim Bovee, Portland, Oregon, May 13, 2015
My volatility trading rules can be read here.
Two social media feeds provide notification whenever something new is posted.
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.