UNP Analysis

Union Pacific Corp. (UNP)

Update 2/8/2017: UNP gapped up after earnings were published and rose a bit more. It then declined several days later, remaining slightly above the boundary of profitability. I exited nine days before the final trading day for the options used to construct the position,

Shares rose by 3.7% over 21 days, or a 64% annual rate. The options position produced a 20.0% loss on debit for a -348% annual rate.


 

UNP publishes earnings on Thursday before the opening bell.

I shall use the FEB series of options, which trades for the last time 30 days hence, on Feb. 17.

Implied volatility stands at 33%, which is 2.6 times the VIX, a measure of the volatility of the S&P 500 index.

UNP’s IV stands in the 71st percentile of its annual range and the 99th percentile of its most recent broad movement.

The price used for analysis was $103.71.

Premium: $5.88 FEB iron fly
UNP   Odds Delta
Calls
Long 110.00 80.9% 21
Break-even 105.94
Short 100.00 35.0% 68
Puts
Short 100.00 66.1% 31
Break-even 94.06
Long 90.00 91.7% 7

The premium is 59% of the width of the position’s wings.

The risk/reward ratio is 0.7:1.

Decision for My Account

I have opened a position on UNP as described above. The stock at the time of entry was priced at $103.77.

By Tim Bovee, Portland, Oregon, Jan. 18, 2017

3 thoughts on “UNP Analysis

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