Shares rose by 1.7% over four days, or a +156% annual rate. The options produced a 212.5% yield on debit, for a +19,391% annual rate.
The financial company Wells Fargo & Co. (WFC), headquartered in San Francisco, California, publishes earnings on Tuesday prior to the opening bell.
[WFC in Wikipedia]
Click on chart to enlarge.
|WFC at 11:23 a.m. New York time, 30 days hourly bars|
|Week||SD1 68.2%||SD2 95%||Chart||Earns|
I shall use the JUL4 weekly series of options, which trades for the last time 11 days hence, on July 24.
short the $56 puts and long the $55 puts,
sold for a credit and expiring July 25.
Probability of expiring out-of-the-money
I skewed the profit zone toward the high side to account for the upward trend since July 7. Doing so puts the one standard deviation upper boundary within the zone of profit but leaves the lower boundary in unprofitable territory.
The zone of profit in the proposed trade covers a $1.50 move either way. The biggest immediate move after each of the past four earnings announcements was $1.46, and the average was $0.94.
The risk/reward ratio is 3:1.
Decision for My Account
I've opened a position in WFC as described above.
-- Tim Bovee, Portland, Oregon, July 13, 2015
My volatility trading rules can be read here.
Two social media feeds provide notification whenever something new is posted.
- On Twitter, Follow Tim Bovee: https://twitter.com/TimBovee
- On Facebook, Like Private Trader: https://www.facebook.com/PrivateTrader
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.
Post a Comment