KRE Analysis

SPDR S&P Regional Banking ETF (KRE)

Update 5/10/2017: KRE swung in the zig-zag pattern characteristic of a sideways correction, with time decay eventually bringing it to profitability I exited at 25% of maximum potential profit.

Shares produced a net rise of 3.0% over 44 days, or a 25% annual rate. The options position produced a 33.3% yield on debit for a 277% annual rate.

KRE’s implied volatility stands sufficiently high for me to meet my standards for trading.

I shall use the MAY series of options, which trades for the last time 53 days hence, on May 19.

Implied volatility stands at 26%, which is double the VIX, a measure of the volatility of the S&P 500 index.

KRE’s IV stands in the 43rd percentile of its annual range and the 52nd percentile of its most recent broad movement.

The price used for analysis was $52.54.

Premium: $3.48 Expire OTM  
KRE – iron fly Strike Odds Delta
Long 58.00 87.6% 14
Break-even 55.48
Short 52.00 47.1% 57
Short 52.00 53.1% 32
Break-even 48.52
Long 45.00 89.4% 9

The premium is 54% of the width of the position’s wings.

The risk/reward ratio is 1:1.

Decision for My Account

I have entered a position on KRE as described above. The stock at the time of entry was priced at $52.68.

By Tim Bovee, Portland, Oregon, March 27, 2017

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