Friday, August 21, 2015

USB Analysis

Update 9/19/2015: The calls half of the USB iron condor expired without value for maximum profit, although the pouts, exited earlier, produced a loss. Shares declined by 4.8% over 24 days, or a -783% annual rate. The iron condor produced a -4.4% loss on debit, for a -77% annual rate.

Update 9/3/2015: USB gapped down sharply along with much of the market during the China Panic and ended up below the profit zone. It moved back into slight profitability today, and I have exited the put options, transforming the position into a bear spread.

I shall calculate results after the entire position expires in mid-September.

The financial services holding company U.S. Bancorp (USB), headquartered in Minneapolis, Minnesota, closed below its 20-day price channel on Thursday and traded still lower on Friday. The symbol has low historical odds of profitable bear signals, making it a candidate for a non-directional trade.

[USB in Wikipedia]


I shall use the SEP series of options, which trades for the last time 28 days hence, on Sept. 18.


USB has completed six bear signals in the past year, all of them unsuccessful. The signals on average lost 3.3% over 20 days.


Click on chart to enlarge.
USB at 12:40 p.m. New York time, 90 days 2-hour bars
Implied volatility stands at 24.5%, which is 1.1times the VIX, a measure of volatility of the S&P 500 index. USB’s volatility stands at the top of its most recent rise.

Ranges implied by options and the chart
WeekSD1 68.2%SD2 95%ChartEarns
Implied volatility 1 and 2 standard deviations; chart support and resistance, maximum earns move

The Trade

Iron condor, short the $45 calls and long the $47 calls,
short the $41 puts and long the $39 puts,
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 $43.39.

The risk/reward ratio is 3.7:1.

The zone of profit in the proposed trade covers a $3 move either way, or 4.5 times the average true daily range of $0.67.

Decision for My Account

I have opened a position on USB as described above.

-- Tim Bovee, Portland, Oregon, Aug. 21, 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.

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