HAL Analysis

Update 8/24/2015: The premium on my HAL  bear call spread declined to 10 cents on each contract, and I exited the position for a profit. The sharp decline in the stock price came during the China Panic on Aug. 24,

Shares declined by 11.2% over four days, or a -1,017% annual rate. The position produced a 330.0% yield on debit, for a +30,113% annual rate.

---

The oilfield services company Halliburton Co. (HAL), headquartered in Houston, Texas, broke below its 20-day price channel on Wednesday, sending a bear signal. having high historical odds of success.

Note that I have an entirely unrelated earnings play on HAL that expires at the end of the week, on Aug. 22. The analysis of that earlier trade may be read here.

[HAL in Wikipedia]

HAL

Odds

HAL has given three bear signals in the past year. Two were successful, on average yielding a 21% return over 102 days. The one unsuccessful trade lost 11% over 27 days. The 66.7% success rate suggests a directional trade.

Ranges

I shall use the SEP series of options, which trades for the last time 29 days hence, on Sept. 18.

Click on chart to enlarge.

HAL at 10:12 a.m. New York time, 90 days 2-hour bars

Implied volatility stands at 38.3%, which is 2.3 times the VIX, a measure of volatility of the S&P 500 index. HAL’s volatility stands at the peak of its most recent rise.

Ranges implied by options and the chart

Week	SD1 68.2%	SD2 95%	Chart	Earns
Upper	43.57	47.82	43.81	N/A
Lower	35.09	30.84	39.03	N/A
Gain/loss	10.8%	21.6%

Implied volatility 1 and 2 standard deviations; chart support and resistance, maximum earns move
The Trade

Bear call spread, short the $41 calls and long the $43 calls,
sold for a credit and expiring Sept. 19.
Probability of expiring out-of-the-money

SEP	Strike	OTM
	41	70.4%

The premium is $0.43, which is 22% of the width of the position’s wings. The stock at the time of purchase was priced at $39.16.

The risk/reward ratio is 3.7:1.

The zone of profit stretching to the downside provides a cushion 84 cents above price at entry. The average true range is $1.37 per day, or 1.6 times the cushion. In this trade, I'm placing trust in the signal.

Decision for My Account

I've opened a bearish position in HAL as described above.

-- Tim Bovee, Portland, Oregon, Aug. 20, 2015

References

My volatility trading rules can be read here.


Alerts

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

Disclaimer

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.