KSS Analysis

Kohl’s Corp. (KSS)

Update 5/11/2017: KSS zig-zagged sharply after earnings were published, ending up at my exit down 2.5%, or an annual rate of 925%. The options position produced a 45.7% yield on debit for a +16,686% annual rate.

The exit price was a $2.10 debit, or 31.4% of maximum potential profit.

KSS publishes earnings on Thursday before the opening 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 48%, which is 4.8 times the VIX, a measure of the volatility of the S&P 500 index.

KSS’s IV stands in the 78th percentile of its annual range and the 90th percentile of its most recent broad movement.

The price used for analysis was $40.41.

Premium: $3.06 Expire OTM  
KSS-iron fly 2.94 Odds Delta
Long 46.50 91.6% 10
Break-even 43.56
Short 40.50 53.6% 51
Short 40.50 46.4% 49
Break-even 38.06
Long 35.00 87.2% 10

The premium is 53% of the width of the position’s wings.

The risk/reward ratio is 1:1.

Decision for My Account

I have entered a position on KSS as described above. The stock at the time of entry was priced at $40.45.

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

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