Friday, September 16, 2016

SYMC Analysis

The information security company Symantec Corp. (SYMC), headquartered in Mountain View, California, closed Friday with implied volatility in the upper half of its one-year range, qualifying the company for a further look.

[SYMC in Wikipedia]


I shall use the OCT series of options, which trades for the last time 35 days hence, on Oct. 21.


Implied volatility stands at 31%, which is double the VIX, a measure of volatility of the S&P 500 index. SYMC’s volatility stands in the 58th percentile of its annual range. The price used for analysis was $25.32.

Ranges implied by options and earnings
WeekSD1 68.2%SD2 95%Earns
Implied volatility 1 and 2 standard deviations; central tendency earns move

The Trade

SYMC is in an upwave that began in March. My Elliott wave count places the trend in the 4th wave of a higher order, two-month-old 5th wave, suggesting more upside ahead once the correction has ended.

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The correction appears to be tracing a sideways movement, as is typical of 4th waves. However, it is still early to say for sure. Given that analysis, I would be surprised if the corrective wave declines below $24.

A 5th wave can extend for a considerable amount of time. The corresponding 3rd wave of the same order lasted for a month

Zacks Investment Research gives SYMC a neutral rating.

Brokers are pessimistic, in aggregate coming down with a negative 42% enthusiasm rating, with 26% of 19 analysts issuing strong buy recommendations.

I see a near-term bullish chart wrapped in a negative analyst atmosphere.

When in doubt, go for the iron condor, a direction neutral trade.

Iron condor, short the $27 calls and long the $28 calls,
short the $24 puts and long the $23 puts,
sold for a credit and expiring Oct. 22.
Probability of expiring out-of-the-money

The premium is $0.24, which is 24% of the width of the position’s wings.

The risk/reward ratio is 3.2:1.

Decision for My Account

Even squeezing the zone of profit as narrowly as reason would allow, I can't reduce the risk enough to produce a gain that meets my guidelines. The hypothetical $500 trade I use in my analysis is $32 short of my $200 maximum profit standard.

I'm passing on SYMC. No trade.

-- Tim Bovee, Portland, Oregon, Oct. 16, 2016


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


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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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