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.
The oilfield services company Halliburton Co. (HAL), headquartered in Houston, Texas, publishes earnings on Monday before the opening bell.
[HAL in Wikipedia]
Click on chart to enlarge.
|HAL at 10:40 a.m. New York time, 90 days 2-hour bars|
|Week||SD1 68.2%||SD2 95%||Chart||Earns|
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.
short the $37 puts and long the $35 puts,
sold for a credit and expiring Aug. 22.
Probability of expiring out-of-the-money
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
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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