Bank of America Corp. (BAC)
Update 1/20/2016: BAC shares fell after publishing earnings and thereafter traded in a range. Declining implied volatility carried the position to 28% of maximum potential profit. My profit target on iron fly positions is 25%.
Shares declined by 1.1% over eight days, or a -50% annual rate. The options position produced a +39.4% yieled on debit for a +1,796% annual rate.
BAC publishes earnings on Friday prior to the opening bell.
I shall use the FEB series of options, which trades for the last time 36 days hence, on Feb. 17.
Implied volatility stands at 31%, which is 2.7 times the VIX, a measure of the volatility of the S&P 500 index.
BAC’s IV stands in the 48th percentile of its annual range and the 65th percentile of its most recent broad movement.
The price used for analysis was $22.83.
The premium is 43% of the width of the position’s wings.
The risk/reward ratio is 1.3:1.
Decision for My Account
I have entered a position on BAC as described above. The stock at the time of entry was priced at $22.88.
Tim Bovee, Portland, Oregon, Jan. 12, 2017