DG Analysis

Dollar General Corp. (DG)

Update 3/21/2017: DG traded sideways for two trading days after earnings were published and then declined for two more. I exited at 22.2% of maximum potential profit, ending the trade’s short lifespan.

Shares declined by 1.0% over eight days, or a -58.9% annual rate. The options position produced a 28.6% yield on debit for a +1,738% annual rate.


 

DG publishes earnings on Thursday before the opening bell.

I shall use the APR series of options, which trades for the last time 37 days hence, on April 21.

Implied volatility stands at 33%, which is 2.9 times the VIX, a measure of the volatility of the S&P 500 index.

DG’s IV stands in the 71st percentile of its annual range and the 73rd percentile of its most recent broad movement.

The price used for analysis was $72.43.

Premium: $4.50 Expire OTM  
DG – iron fly Strike Odds Delta
Calls
Long 80.00 86.9% 15
Break-even 77.00
Short 72.50 53.5% 51
Puts
Short 72.50 46.5% 49
Break-even 68.00
Long 66.00 81.4% 16

The premium is 61% of the width of the position’s wings.

The risk/reward ratio is 0.6:1.

Decision for My Account

I have entered a position on DG as described above. The stock at the time of entry was priced at $72.30.

By Tim Bovee, Portland, Oregon, March 15, 2017

4 thoughts on “DG Analysis

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