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.
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