Bank of America Corp. (BAC)
Update 5/15/2017: BAC rose sharply beginning on the 5th trading day after earnings were published, gapping on two consecutive days and rapidly becoming unprofitable. As expiration approached, I exited the position for a $3.10 debit.
Shares rose by 6.6% over 28 days, or a +86% annual rate. The options position produced a -23.6% loss on debit for a -308% annual rate.
BAC publishes earnings on Tuesday before the opening bell.
I shall use the MAY series of options, which trades for the last time 32 days hence, on May 19.
Implied volatility stands at 30%, which is double the VIX, a measure of the volatility of the S&P 500 index.
BAC’s IV stands in the 33rd percentile of its annual range and the 77th percentile of its most recent broad movement.
The price used for analysis was $22.55.
|BAC – iron condor||Strike||Odds||Delta|
The premium is 43% of the width of the position’s wings.
The risk/reward ratio is 1.3:1.
Decision for My Account
I have entered a position on BAC as described above. The stock at the time of entry was priced at $22.60.
By Tim Bovee, Portland, Oregon, April 17, 2017