Shares rose by 0.1% over six days, or a 6% annual rate. The options position produced a 210.0% yield on debit, for a 12,775% annual rate.
The discount retail chain Wal-Mart Stores Inc. (WMT), headquartered in Bentonville, Arkansas, broke above its 20-day price channel on Tuesday but pulled back to within the channel today. WMT publishes earnings on Aug. 18 before the opening bell, so any trade must be exited prior to the announcement.
[WMT in Wikipedia]
Only one of the three completed bull signals of the past year produced a profit, making WMT a potential non-directional trade because of its historically low odds of success. The winner produced a 7.0% yield over 81 days. The two losing positions on average fell by 1.5% over 28 days.
Click on chart to enlarge.
|WMT at 1:47 p.m. New York time, 30 days hourly bars|
|Week||SD1 68.2%||SD2 95%||Chart||Earns|
I shall use the JUL monthly series of options, which trades for the last time nine days hence, on July 17.
short the $72 puts and long the $71 puts,
sold for a credit and expiring Aug. 22.
Probability of expiring out-of-the-money
The risk/reward ratio is 2:1.
In order to get it down to that point, which is a bit high for an iron condor, I leave portions of the one standard deviation range, both at the top and the bottom, outside of the profit zone. The chart range is covered at the top, but not entirely at the bottom.
It's a risk, and I'm willing to take it because of the uptrending nature of WMT's chart, and the absence of an earnings announcement during the short duration of this trade.
Decision for My Account
I've opened a position in WMT as described above.
-- Tim Bovee, Portland, Oregon, July 8, 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.License
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