V Analysis

Visa Inc. (V)

Update 4/21/2017: V rose sharply in the pre-market after earnings were published and then after the opening bell dropped back to to the prior day’s closing, bringing the price to close to the maximum profit point on my position. I exited at 20.6% of maximum potential profit; my goal was 25%. Since time is money, I think getting out early was a good trade-off.

Stocks showed a net decline of 0.9% over one day, or a 317% annual rate The options position produced a 26.0% yield on debit for a +9.490% annual rate.


 

V publishes earnings on Thursday after the closing bell.

I shall use the 28APR series of option weeklys, which trades for the last time eight days hence, on April 28.

Implied volatility stands at 26%, which is 1.8 times the VIX, a measure of the volatility of the S&P 500 index.

V’s IV stands in the 75th percentile of its annual range and the 91st percentile of its most recent broad movement.

The price used for analysis was $91.09.

Premium: $3.15 Expire OTM  
V-iron fly Strike Odds Delta
Calls
Long 97.00 94.3% 6
Break-even 94.15
Short 91.00 50.3 52
Puts
Short 91.00 49.7% 49
Break-even 87.85
Long 83.00 91.3% 8

The premium is 45% of the width of the position’s wings.

The risk/reward ratio is 1.2:1.

Decision for My Account

I have entered a position on V as described above. The stock at the time of entry was priced at $91.08.

By Tim Bovee, Portland, Oregon, April 20, 2017

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