Thursday, July 16, 2015

SLB Analysis

Update 8/19/2015: I exited SLB for a profit as the position neared expiration.

Shares declied by 3.7% over 34 days, or a -40% annual rate. The options produced a 1,050.0% yield on debit, for a +11,272% annual rate.

The oilfield services company Schlumberger Ltd. (SLB), headquartered in Houston, Texas, publishes earnings on Thursday after the closing bell.

[SLB in Wikipedia]



Click on chart to enlarge.
SLB at 10:25 a.m. New York time, 30 days hourly bars
Implied volatility stands at 25.6%, which is 2.1 times the VIX, a measure of volatility of the S&P 500 index. SLB’s volatility stands in the 77th percentile of its most recent rise.

I shall use the AUG monthly series of options, which trades for the last time 36 days hence, on Aug. 21.

Ranges implied by options and the chart
WeekSD1 68.2%SD2 95%ChartEarns
Implied volatility 1 and 2 standard deviations; chart support and resistance, maximum earns move

The Trade

The iron condor structure, which hedges declines, had insufficient premium to accommodate the wide swings implied by SLB's past post-earnings moves. I've gone with the strangle instead, which allows for a wider profit zone.

Strangle, short the $90 calls and long the $87.50 puts,
sold for a credit and expiring Aug. 22
Probability of expiring out-of-the-money


The premium is $1.15. The stock at the time of purchase was priced at $84.06.

The zone of profit in the proposed trade covers a $6.25 move either way. The biggest immediate move after each of the past four earnings announcements was $4.70, and the average was $2.82.

Decision for My Account

I've opened a position in SLB as described above.

-- Tim Bovee, Portland, Oregon, July 16, 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.

Creative Commons 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

No comments:

Post a Comment