Update 9/9/2015: I've exited the calls on my position after AVGO tipped above the profit zone. The position is now a bull put options spread expiring in September.
In rising AVGO triggered a bull signal, and I have separately opened a bull put spread expiring in October. (See the Sept. 9 analysis here.)
I shall calculate profit and loss on the positions separately as they expire.
The analog semiconductor company Avago Technologies Ltd. (AVGO), headquartered in San Jose, California and Singapore, publishes earnings on Wednesday after the closing bell.
[AVGO in Wikipedia]
I shall use the SEP series of options, which trades for the last time 23 days hence, on Sept. 18.
Click on chart to enlarge.
|AVGO 10:06 a.m. New York time, 90 days 2-hour bars|
|Week||SD1 68.2%||SD2 95%||Chart||Earns|
short the $90 puts and long the $95 puts,
sold for a credit and expiring Sept. 19.
Probability of expiring out-of-the-money
The premium is $1.02, which is 25% of the width of the position’s wings.The stock at the time of purchase was priced at $112.52.
The risk/reward ratio is 4:1.
The zone of profit in the proposed trade covers a $20 move either way. The biggest immediate move after each of the past four earnings announcements was $16.57, and the average was $7.78.
Decision for My Account
I've opened a position in AVGO as described above.
-- Tim Bovee, Portland, Oregon, Aug. 26, 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.