WFM Analysis

Whole Food Market Inc. (WFM)

WFM publishes earnings on Wednesday 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 37%, which is 3.4 times the VIX, a measure of the volatility of the S&P 500 index.

WFM’s IV stands in the 62nd percentile of its annual range and at the 87th percentile of its most recent broad movement.

The price used for analysis was $36.52

Premium: $1.98 Expire OTM  
WFM-iron fly Strike Odds Delta
Long 42.00 91.5% 10
Break-even 38.48
Short 36.50 51.5% 52
Short 36.50 48.8% 48
Break-even 34.98
Long 33.00 88.1% 10

The premium is 44% of the width of the position’s wings.

The risk/reward ratio is 1.8:1.

Decision for My Account

Using my standard construction for the trade, the best I can do is an unacceptably high risk/reward ratio. I am passing on this WFM today.

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

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