HAL Analysis

Update 8/22/2015: My HAL calls expired Saturday. Shares fell 9.4% over 36 days, or a -96% annual rate. The options produced an 8.0% loss on debit for a 82% annual rate.

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Update 8/21/2015: HAL slipped below the profit zone on the positions last day of trading before expiration. The decline was part of a broad market movement to the downside.

I've exited the puts portion of the position, transforming the iron condor into a bear call spread. I shall calculate profit and loss after the calls expire on Saturday, wrapping up the entire position.

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The oilfield services company Halliburton Co. (HAL), headquartered in Houston, Texas, publishes earnings on Monday before the opening bell.

[HAL in Wikipedia]

HAL

Ranges

Click on chart to enlarge.

HAL at 10:40 a.m. New York time, 90 days 2-hour bars

Implied volatility stands at 32.2%, which is 2.7 times the VIX, a measure of volatility of the S&P 500 index. HAL’s volatility stands in the 81st percentile of its most recent rise.

Ranges implied by options and the chart

Week	SD1 68.2%	SD2 95%	Chart	Earns
Upper	41.33	42,97	46.69	40.65
Lower	38.05	36.41	39.27	38.73
Gain/loss	4.1%	8.3%

Implied volatility 1 and 2 standard deviations; chart support and resistance, maximum earns move
The Trade

I shall use the AUG monthly series of options, which trades for the last time !0 days hence, on Aug. 21.

The premium is $0, which is 0% of the width of the position’s wings.The stock at the time of purchase was priced at $0.

Iron condor, short the $42 calls and long the $44 calls,
short the $37 puts and long the $35 puts,
sold for a credit and expiring Aug. 22.
Probability of expiring out-of-the-money

AUG	Strike	OTM
Upper	42	72,9%
Lower	37	74.5%

The chart has a strong downward bias, and in constructing this trade I lowered the floor of the profit range to well below the boundary implied by volatility, the chart and historical moves in response to earnings.

The premium is $0.60, which is 35% of the width of the position’s wings.The stock at the time of purchase was priced at $39.73.

The risk/reward ratio is 1.9:1.

The zone of profit in the proposed trade covers a $2.50 move either way. The biggest immediate move after each of the past four earnings announcements was $0.96, and the average was $0.51.

Decision for My Account

I've opened a position on HAL as described above.

-- Tim Bovee, Portland, Oregon, July 17, 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.

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