SU Analysis

Suncor Energy Inc. (SU)

Update 3/18/2017: SU rose after earnings were published and then took it all back. A short put options was assigned when the stock went ex-dividend, creating a complex exit: After the assignment, I sold the short call options, and then let the long options — calls and puts — expire worthless.

For the entire position, shares showed a net rise of 0.5% over 37 days, or a +5% annual rate. The options positions, including the shares from assignment, altogether produced a -9.6% loss on debit for a 95% annual rate.

Lesson learned: Don’t overlook ex-dividend dates. It’s bad joss.


 

SU publishes earnings on Wednesday after the closing bell.

I shall use the MAR series of options, which trades for the last time 37 days hence, on March 17.

Implied volatility stands at 28%, which is 2.5 times the VIX, a measure of the volatility of the S&P 500 index.

SU’s IV stands in the 16th percentile of its annual range and the 91st percentile of its most recent broad movement. The broad movements have been relatively narrow compared to the annual range because of an IV spike to the upside in February 2016.

The price used for analysis was $30.70.

Premium: $1.86 MAR iron fly
SU   Odds Delta
Calls
Long 34.00 91.6% 10
Break-even 31.86
Short 30.00 41.9% 62
Puts
Short 30.00 57.6% 39
Break-even 28.14
Long 27.00 89.0% 9

The premium is 53% of the width of the position’s wings.

The risk/reward ratio is 1.1:1.

Decision for My Account

I have entered a position on SU as described above. The stock at the time of entry was priced at $30.73.

By Tim Bovee, Portland, Oregon, Feb. 8, 2017

5 thoughts on “SU Analysis

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