BIDU Analysis

Baidu Inc. (BIDU)

BIDU publishes earnings on Thursday after the closing bell.

I shall use the series of weekly options that trade for the last time eight days hence, on May 5.

Implied volatility stands at 30%, which is 2.8 times the VIX, a measure of the volatility of the S&P 500 index.

BIDU’s IV stands in the 59th percentile of its annual range and the 90th percentile of its most recent broad movement.

The price used for analysis was $186.69.

Premium: $9.70 Expire OTM  
BIDU-iron fly Strike Odds Delta
Long 207.50 92.2% 9
Break-even 197.20
Short 187.50 53.8 49
Short 187.50 46.2% 51
Break-even 179.70
Long 170.00 90.0% 9

The premium is 52% of the width of the position’s wings.

The risk/reward ratio is 1.1:1.

Decision for My Account

BIDU is an expensive stock, and that carries more dollar risk than I care to assume. I’m passing the trade.

By Tim Bovee, Portland, Oregon, April 27, 2017

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