XOP Analysis

SPRRA S&P Oil & Gas Exploration and Production ETF (XOP)

Update 5/22/2017: XOP declinedafter entry for four days as then rose for three, ending close to where it began. I exited as earnings approached at 4.8% of maximum potential profit.

Shares showed a net rise of 0.7% over seven days, or a +35% annual rate. The options position produced a 5.0% yield on debit for a +261% annual rate.

XOP meets my implied volatility criteria for further consideration as a trade.

I shall use the series of monthly options that trade for the last time 11 days hence, on May 26.

Implied volatility stands at 32%, which is 3.1 times the VIX, a measure of the volatility of the S&P 500 index.

XOP’s IV stands in the 36th percentile of its annual range and the 78th percentile of its most recent broad movement.

The price used for analysis was $35.47

Premium: $1.47 Expire OTM  
XOP-iron fly Strike Odds Delta
Long 38.50 91.4% 10
Break-even 36.97
Short 35.50 53.3% 51
Short 35.50 48.6% 49
Break-even 33.97
Long 32.50 88.7 9

The premium is 49% of the width of the position’s wings.

The risk/reward ratio is 1:1.

Decision for My Account

I have entered a position on XOP as described above. The stock at the time of entry was priced at $1.47.

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

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