WFC Analysis

Wells Fargo & Co. (WFC)

Update 4/19/2017: WFC gapped to the downside after earnings were published and then over three days retraced much of the decline. I exited at 19.4% of maximum potential profit.

Shares declined by 2.0% over seven days, or a -102% annual rate. The options position produced a 24.1% yield on debit for a +1,258% annual rate.


 

WFC publishes earnings on Thursday before the opening bell.

I shall use the MAY series of options, which trades for the last time 37 days hence, on May 19.

Implied volatility stands at 26%, which is 1.6 times the VIX, a measure of the volatility of the S&P 500 index.

WFC’s IV stands in the 56th percentile of its annual range and the peak of its most recent broad movement.

The price used for analysis was $53.37.

Premium: $2.83 Expire OTM  
WFC – iron fly Strike Odds Delta
Calls 86.8% 15
Long 57.50 43.3% 60
Break-even 55.33
Short 52.50
Puts
Short 52.50 55.9% 41
Break-even 49.67
Long 47.50 88.0% 10

The premium is 57% of the width of the position’s wings.

The risk/reward ratio is 0.7:1.

Decision for My Account

The stock at the time of entry was priced at $53.44.

By Tim Bovee, Portland, Oregon, April 12, 2017

2 thoughts on “WFC Analysis

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