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 |
| Calls | |||
| Long | 42.00 | 91.5% | 10 |
| Break-even | 38.48 | ||
| Short | 36.50 | 51.5% | 52 |
| Puts | |||
| 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
Tim Bovee, Private Trader 
[…] analyzed WFM but declined to take the trade. I have entered an exit order on OAS at my target price. I shall […]
LikeLike