DAL Analysis

Delta Air Lines Inc. (DAL)

Update 4/27/2017DAL did a fair imitation of a yo-yo after earnings were published, rising sharply from where it began the today and then falling to near its starting point, falling further the next day and then rising to slightly beyond the post-earnings peak, and then declined again to near where the fluctuations began.

All in all, a lot of Sturm und Drang, signifying nothing. I exited at 33% of maximum potential profit.

Shares staged a net decline of 0.8% over 16 days, or a +18% annual rate. The options position produced a 49.1% yield on debit for a +1,121% annual rate.

DAL publishes earnings on Wednesday before the opening bell.

I shall use the MAY series of options, which trades for the last time 38 days hence, on May 19.

Implied volatility stands at 32%, which is 2.1 times the VIX, a measure of the volatility of the S&P 500 index.

DAL’s IV stands in the 27th percentile of its annual range and the 96th percentile of its most recent broad movement, which is in a fairly narrow range typical of DAL for the past two months.

The price used for analysis was $44.96.

Premium: $2.61 Expire OTM  
DAL – iron condor Strike Odds Delta
Long 50.00 88.2% 14
Break-even 47.61
Short 45.00 53.7% 50
Short 44.00 54.8% 41
Break-even 41.39
Long 39.00 87.5% 10

The premium is 52% of the width of the position’s wings.

The risk/reward ratio is 0.9:1.

Decision for My Account

I have entered a position on DAL as described above. The stock at the time of entry was priced at $44.86.

By Tim Bovee, Portland, Oregon, April 11, 2017

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