The Home Depot Inc. (HD)
Update 5/16/2017: HD gapped to the upside after earnings were published, and I exited for $3.67, or 25% of maximum potential profit.
Shares rose by 1.4% from my entry a day earlier, or a +517% annual rate. The options position produced a 33.2% yield on debit for a +12,134% annual rate.
HD publishes earnings on Tuesday before the opening bell.
I shall use the series of weekly options that trade for the last time 11 days hence, on May 26.
Implied volatility stands at 22%, which is 2.1 times the VIX, a measure of the volatility of the S&P 500 index.
HD’s IV stands in the 60th percentile of its annual range and the 90th percentile of its most recent broad movement.
The price used for analysis was $157.02.
The premium is 49% 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 HD as described above. The stock at the time of entry was priced at $157.00.
By Tim Bovee, Portland, Oregon, May 15, 2017