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.

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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