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 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.
I shall use the SEP series of options, which trades for the last time 29 days hence, on Sept. 18.
|HAL at 10:12 a.m. New York time, 90 days 2-hour bars|
|Week||SD1 68.2%||SD2 95%||Chart||Earns|
sold for a credit and expiring Sept. 19.
Probability of expiring out-of-the-money
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
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.
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