TJX Analysis

The TJX Companies Inc. (TJX)

Update 5/22/2017: TJX gapped to the downside after earnings were published and then crept back up to about the midpoint of the gap. That partial recovery and the workings of time decay brought the position to profitability. I exited at 25% of maximum potential profit.

Shares showed a net decline of 2.4% over seven days, or a -123% annual rate. The options position produced a 33.3% yield on debit for a +1,738% annual rate.

TJX publishes earnings on Tuesday before the opening bell.

I shall use the series of monthly options that trade for the last time 32 days hence, on June 16.

Implied volatility stands at 28%, which is 2.6 times the VIX, a measure of the volatility of the S&P 500 index.

TJX’s IV stands in the 74th percentile of its annual range and at the peak of its most recent broad movement.

The price used for analysis was $77.32.

Premium: $3.92 Expire OTM  
TJX-iron fly Strike Odds Delta
Long 85.00 91.5% 10
Break-even 81.42
Short 77.50 54.2% 49
Short 77.50 45.7% 51
Break-even 73.92
Long 70.00 85.8% 12

The premium is 52% of the width of the position’s wings.

The risk/reward ratio is 0.9:1.

Decision for My Account

I have entered a position on TJX as described above. The stock at the time of entry was priced at $77.19.

By Tim Bovee, Portland, Oregon, May 15, 2017

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