Shares rose 4.9% over the nine-day lifespan of the position, or a +211% annual rate. The options produced a 72.3% loss on debit, for a -3,106% annual rate.
The financial company Citigroup Inc. (C), headquartered in New York City, publishes earnings on Thursday before the opening bell.
[C in Wikipedia]
Click on chart to enlarge.
|C at 11:30 a.m. New York time, 30 days hourly bars|
I shall use the JUL4 weekly series of options, which trades for the last time nine days hence, on July 24.
|Week||SD1 68.2%||SD2 95%||Chart||Earns|
short the $54.50 puts and long the $53.50 puts,
sold for a credit and expiring July 25.
Probability of expiring out-of-the-money
The premium is $0.26, which is 26% of the width of the position’s wings.The stock at the time of purchase was priced at $56.50.
The risk/reward ratio is 2.7:1.
The zone of profit in the proposed trade covers a $1.75 move either way. The biggest immediate move after each of the past four earnings announcements was $1.82, and the average was $1.46.
Decision for My Account
I've opened a position in C as described above.
-- Tim Bovee, Portland, Oregon, July 15, 2015
My volatility trading rules can be read here.
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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.
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