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.
|WFC – iron fly||Strike||Odds||Delta|
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