JWN Analysis

Nordstrom Inc. (JWN)

Update 5/15/2017: JWN declined sharply after earnings were published and gapped down further after earnings were published. I exited the position for a $7.11 debit.

Shares declined by 15.3% over five days, or a -1,116% annual rate. The options position produced a -51.6% loss on debit for a -3,768% annual rate.

JWN publishes earnings on Thursday after the closing bell.

I shall use the series of weekly options that trade for the last time nine days hence, on May 19.

Implied volatility stands at 46%, which is 4.6 times the VIX, a measure of the volatility of the S&P 500 index.

JWN’s IV stands in the 63rd percentile of its annual range and the 97th percentile of its most recent broad movement.

The price used for analysis was $49.47.

Premium: $3.44 Expire OTM  
JWN-iron fly Strike Odds Delta
Long 55.00 87.1% 15
Break-even 53.44
Short 50.00 56.2% 48
Short 50.00 43.8% 52
Break-even 45.94
Long 42.50 87.9% 8

The premium is 55% of the width of the position’s wings.

The risk/reward ratio is 1.2:1.

Decision for My Account

The options grid was lacking a strike price around the 10 delta level of the calls, so I was forced to shorten the call wing a bit. Nonetheless, I have entered a positIon on WFM as described above. The stock at the time of entry was priced at $49.46.


By Tim Bovee, Portland, Oregon, May 10, 2017

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