Harley-Davidson Inc. (HOG)
HOG declined sharply after earnings were published and then retained sufficient ground to the upside that, along with declining implied volatility and time decay, allowed it to become profitable. I exited at my target price of 25% of maximum potential profit.
Shares declined by 4.5% over nine days, or a -184% annual rate. The options position produced a 33.1% yield on debit for a +1,344% annual rate
HOG 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 40%, which is 2.6 times the VIX, a measure of the volatility of the S&P 500 index.
HOG’s IV stands in the 46th percentile of its annual range and the 95th percentile of its most recent broad movement.
The price used for analysis was $60.01.
The premium is 47% of the width of the position’s wings.
The risk/reward ratio is 1.1:1.
Decision for My Account
I have entered a position on HOG as described above. The stock at the time of the entry was priced at $59.99.
By Tim Bovee, Portland, Oregon, April 17, 2017