The Coca-Cola Co. (KO)
KO publishes earnings on Tuesday before the opening bell.
I shall use the series of weekly options that trade for the last time 11 days hence, on May 5.
Implied volatility stands at 14%, which is 1.2 times the VIX, a measure of the volatility of the S&P 500 index.
KO’s IV stands in the 39th percentile of its annual range and the 67th percentile of its most recent broad movement.
The price used for analysis was $43.33.
The premium is 50% of the width of the position’s wings.
The risk/reward ratio is 1.8:1.
Decision for My Account
The risk/reward ratio is higher than I like for this trade structure. Generally for an iron fly I am reluctant to go higher than 1.2:1. For that reason, I am passing on the trade. The stock at the time of decision was priced at $43.39.
By Tim Bovee, Portland, Oregon, April 24, 2017