Update 5/15/2017: M gapped sharply to the downside the immediately after earnings were published and continued to decline in the ensuing two trading days. I exited the position for a debit of $3.65.
Shares declined by 19.9% over five days, or a -1,437% annual rate. The options position produced a -42.5% loss on debit for a -3,100% annual rate.
M 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 47%, which is 4.7 times the VIX, a measure of the volatility of the S&P 500 index.
M’s IV stands in the 88th percentile of its annual range and at the peak of its most recent broad movement.
The price used for analysis was $29.56.
The premium is 53% of the width of the position’s wings.
The risk/reward ratio is 1.1:1.
Decision for My Account
I have entered a position on M as described above. The stock at the time of entry was priced at $29.54.
By Tim Bovee, Portland, Oregon, May 10, 2017