CSX Analysis

CSX Corp. (CSX)

Update 1/11/2017: CSX remained within its profit zone until nine days before expiration, when it broke above of its =trading narrow range and came very close to becoming unprofitable. I chose to eliminate the risk by exiting at 6.6% of maximum potential profit.

Shares rose by 3.8% over 28 days, or a +49% annual rate. The options position produced a 7.0% yield on debit for a +92% annual rate.

I’m looking at CSX as a potential volatility play.

I shall use the JAN series of options, which trades for the last time 37 days hence, on Jan. 20.

Implied volatility stands at 29%, which stands in the 35th percentile of its annual range and the 77th percentile of its most recent broad movement. The price used for analysis was $36.82.

Iron condor, short the $38 calls and long the $40 calls,

short the $35 puts and long the $33 puts,

sold for a credit and expiring Jan. 21.

Probability of expiring out-of-the-money

JAN Strike OTM Δ
Upper 38 67.5% 36
Lower 35 69.4% 27

The premium is $0.76, which is 36% of the width of the position’s wings.

The risk/reward ratio is 1.6:1.

The zone of profit in the proposed trade covers a $1.50 move either way. 

Decision for My Account

I have opened a position on CSX as described above. The stock at the time of entry was priced at $36.69.

Tim Bovee, Portland, Oregon, Dec. 14, 2016

4 thoughts on “CSX Analysis

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