[DUK in Wikipedia]
DUK was wrongly put in the high-odds category. Its previous bull signals have split evenly, with two coming out with a profit and two with a loss. the successful trdes on average produced a 4% yield over 59 days; the losers, a 3.1% loss over 39 days.
Despite the error in the early analysis, I shall soldier on and see if there is indeed a trade to be found in DUK.
Click on chart to enlarge.
|DUK at 11:15 a.m. New York time, 30 days hourly bars|
|Week||SD1 68.2%||SD2 95%||Chart||Earns|
I shall use the JUL monthly series of options, which trades for the last time nine days hence, on July 17.
sold for a credit and expiring July 18.
Probability of expiring out-of-the-money
The premium is $0.12, which is 5% of the width of the position’s wing. I prefer a 33% width. The stock at the time of analysis was priced at $75.14.
The difficulty lies in the risk/reward ratio. A structure that covers the lower boundary of the one standard deviation range produces a 19.8:1 risk/reward ratio. That's far higher than I'm willing to accept. Generally, 7:1 or so is as high as I'll go with a directional play.
Decision for My Account
I'm passing on DUK because of the high risk/reward ratio. No trade.
-- Tim Bovee, Portland, Oregon, July 8, 2015
My volatility trading rules can be read here.
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