HOG Analysis

Harley-Davidson Inc. (HOG)

Update 4/26/2017:

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.

Premium: $4.70 Expire OTM  
HOG-iron fly Strike Odds Delta
Calls
Long 70.00 92.9% 9
Break-even 64.70
Short 60.00 52.9% 52
Puts
Short 60.00 47.3% 48
Break-even 55.30
Long 50.00 89.2% 8

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

5 thoughts on “HOG Analysis

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