QCOM Analysis

Tim Bovee9 Comments

QUALCOMM Inc. (QCOM)

Update 2/10/2017: Having gapped down sharply a few days before publication of earnings, and before I entered my position, QCOM continued to decline, more slowly, after publication but remained above the break-even point. I exited at 25.2% of maximum potential profit.

Shares declined by 4.9% ver 16 days, or a -109% annual rate. The options position produced a 33.7% yield on debit for a +768% annual rate

 

QCOM publishes earnings on Wednesday after the closing bell.

I shall use the MAR series of options, which trades for the last time 51 days hence, on March 17.

Implied volatility stands at 35%, which is 3.2 times the VIX, a measure of the volatility of the S&P 500 index.

QCOM’s IV stands in the 68th percentile of its annual range and the 83rd percentile of its most recent broad movement.

The price used for analysis was $56.05.

Premium: $3.89 MAR iron fly
QCOM   Odds Delta
Calls
Long 62.50 87.2% 15
Break-even 58.89
Short 55.00 47.4% 57
Puts
Short 55.00 52.2% 43
Break-even 51.11
Long 50.00 76.6% 17

The premium is 62% of the width of the position’s wings. The wing are of unequal width because on the put side, the strike prices were at $5 intervals, whereas on the call side, the interval was $2.50.

The risk/reward ratio is 0.9:1.

Decision for My Account

I have entered a position on QCOM as described above. The stock at the time of entry was priced at $56.04.

By Tim Bovee, Portland, Oregon, Jan. 25, 2017

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