Thursday, July 23, 2015

SWKS Analysis

Update 8/1/2015: The SWKS calls expired without value.

The stock price declined by 7.7% over eight days, or a -349% annual rate. The options produced a +57.8%yield on debit, for a +2,639% annual rate.

Update 7/30/2015: SWKS was at the edge of profit as expiration approached and I exited the puts, transforming the iron condor into a bear call spread. I'll calculate profit/loss on the position after it expires on Saturday.

The semiconductor company Skyworks Solutions Inc. (SWKS), headquartered in Woburn, Massachusetts, publishes earnings on Thursday after the closing bell.

[SWKS in Wikipedia]



Click on chart to enlarge.
SWKS at 11:55 a.m. New York time, 30 days hourly bars
Implied volatility stands at 48.8%, which is 3.9 times the VIX, a measure of volatility of the S&P 500 index. SWKS’s volatility stands in the 78th percentile of its most recent rise.

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

I shall use the JUL5 weekly series of options, which trades for the last time eight days hence, on July 31.

Iron condor, short the $110 calls and long the $114 calls,
short the $95 puts and long the $91 puts,
sold for a credit and expiring Aug. 1.
Probability of expiring out-of-the-money


The premium is $1.31, which is a third of the width of the position’s wings.The stock at the time of purchase was priced at $103.37.

The risk/reward ratio is 1.9:1.

The zone of profit in the proposed trade covers a $7.50 move either way. The biggest immediate move after each of the past four earnings announcements was $6.53, and the average was $4.09.

Decision for My Account

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

-- Tim Bovee, Portland, Oregon, July 23, 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.
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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