Shares declined by 5.2% over nine days, or a -212% annual rate. The otpions produced a -46.4% loss on debit, for a -1,880% annual rate.
The managed health care company UnitedHealth Group Inc. (UNH), headquartered in Minnetonka, Minnesota, publishes earnings on Thursday before the opening bell.
[UNH in Wikipedia]
Click on chart to enlarge.
|UNH at 10:53 a.m. New York time, 30 days hourly bars|
I shall use the JUL4 weekly series of options, which trades for the last time nine days hence, on July 24.
|Week||SD1 68.2%||SD2 95%||Chart||Earns|
short the $120 puts and long the $118 puts,
sold for a credit and expiring July 25.
Probability of expiring out-of-the-money
The risk/reward ratio is 3:1.
The zone of profit in the proposed trade covers a $5 move either way. The biggest immediate move after each of the past four earnings announcements was $4.28, and the average was $3.14.
Decision for My Account
I've opened a position in UNH as described above.
-- Tim Bovee, Portland, Oregon, July 15, 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.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 www.timbovee.com.