RRC Analysis

Range Resources Corp. (RRC)

Update 3/6/2017: RRC continued an ongoing decline to below the zone of profitability after earnings were published. A gap up this morning provided an opportunity to get out at 6.4% of maximum potential profit, well below my 25% profit. However, with expiration approaching, I was content to end the trade in the black.

Shares declined by 5.9% over 12 days, or a -179% annual rate. The options positon produced a 6.9% yield on debit for +209% annual rate.


RRC publishes earnings on Wednesday after the closing bell.

I shall use the MAR series of options, which trades for the last time 23 days hence, on March 17. The APR series options, trading for the first time today, were too illiquid for my taste.

Implied volatility stands at 45%, which is !0 times the VIX, a measure of the volatility of the S&P 500 index.

RRC’s IV stands in the 17th percentile of its annual range and the 89th percentile of its most recent broad movement.

The price used for analysis was $30.21.

Premium: $2.33 Expire OTM iron fly
RRC   Odds Delta
Long 35.00 91.9% 10
Break-even 32.33
Short 30.00 50.3% 54
Short 30.00 49.7% 46
Break-even 27.67
Long 25.00 86.6% 10

The premium is 46% of the width of the position’s wings.

The risk/reward ratio is 0.8:1.

Decision for My Account

I entered a position on RRC as described above. The stock at the time of entry was priced at $30.17.

By Tim Bovee, Portland, Oregon, Feb. 22, 2017

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