LMT Analysis

Tim Bovee7 Comments

Lockheed Martin Corp. (LMT)

Update 2/24/2017: LMT rose almost continually in the weeks after earnings were published. I exited at 12.5% of maximum potential profit — about half of my target for trades structured the way LMT is — in order to avoid an ex-dividend date.

Shares rose by 3.4% over 32 days, or a +39% annual rate. The options position produced a 14.3% yield on debit for a +163% annual rate

 

LMT publishes earnings on Tuesday before the opening bell.

I shall use the MAR series of options, which trades for the last time 53 days hence, on March 17.

Implied volatility stands at 22%, which is 1.8 times the VIX, a measure of the volatility of the S&P 500 index.

LMT’s IV stands in the 52nd percentile of its annual range and the 77th percentile of its most recent broad movement.

The price used for analysis was $255.39.

Premium: $11.76 MAR iron fly
LMT   Odds Delta
Calls
Long 275.00 88.4% 13
Break-even 266.76
Short 255.00 52.0% 51
Puts
Short 255.00 47.9% 49
Break-even 243.24
Long 35.00 81.9% 16

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

The risk/reward ratio is 0.7:1.

Decision for My Account

The stock at the time of entry was priced at $255.67.

By Tim Bovee, Portland, Oregon, Jan. 23, 2017

7 thoughts on “LMT Analysis”

Comments are closed.