Shares declined by 4.0% over 22 days, or a -66% annual rate. The options position produced a 160.0% yield on debit for a +2,655% annual rate.
The consumer financial services company Synchrony Financial (SYF), headquartered in Stamford, Connecticut, closed Tuesday with implied volatility sufficiently high and continues to meet my standard requiring volatility at the 50th percentile of its annual range or higher.
[SYF in Wikipedia]
SYF
I shall use the SEP series of options, which trades for the last time 43 days hence, on Sept. 16.
Ranges
Implied volatility stands at 28%, which is 2.2 times the VIX, a measure of volatility of the S&P 500 index. SYF’s volatility stands in the 50th percentile of its annual range. The price used for analysis was $27.81.
| Week | SD1 68.2% | SD2 95% | Earns |
|---|---|---|---|
| Upper | 30.45 | 33.09 | N/A |
| Lower | 25.16 | 22.52 | N/A |
| Gain/loss | ±$2.64 | ±$5.28 |
by Laurentiu Damir |
The Trade
My description of the chart from the last time I analyzed SYF, on Aug. 1, still stands:
"SYF has been trending downward since July 2015, It bounced up from a low on June 27, recovered about half of its most recent decline and is now engaged in a multi-day sideways trend."
The slow decline has continued, and unlike at the time of the last analysis, the MACD has fallen below the zero line.
Zacks Investment Research is bearish on SYF. Brokerages collectively come down with a 58% enthusiasm rating, with three-fourths of 12 analysts issuing strong buy recommendations.
Last time I attempted to build a trade on SYF, I used a direction-neutral strategy, which produced greater risk than I like. This time, following the chart, I shall attempt a directional bear strategy.
sold for a credit and expiring Sept. 17.
Probability of expiring out-of-the-money
| SEP | Strike | OTM |
|---|---|---|
| 28 | 54.8% |
The premium is $0.39, which is 39% of the width of the strikes. The stock at the time of the order was priced at $27.84.
The risk/reward ratio is 1.6:1.
The zone of profit in the proposed trade stretches $0.16 above the order price.
Decision for My Account
I've entered a position on SYF as described above.
-- Tim Bovee, Portland, Oregon, Aug. 4, 2016
References
Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.
Elliott wave analysis tracks patterns in price movements. StockCharts has a good explainer. The principal practioner of Elliott wave analysis is Robert Prechter at Elliott Wave International. His book, Elliott Wave Principle, is a must-read for people interested in this form of analysis, as is his most recent publication, Visual Guide to Elliott Wave Trading.
Alerts
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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.
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