DE Analysis

Deere & Co. (DE)

Update 5/22/2017; DE gapped sharply to the upside after earnings were published and stayed at that higher level for two subsequent days. I exited for a loss as the options approached expiration.

Shares rose by 8.2% over four days, o a +751% annual rate. The options position produced a -37.3% loss on debit for a -3,399% annual rate.

DE publishes earnings on Friday before the opening bell.

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

Implied volatility stands at 29%, which is 1.9 times the VIX, a measure of the volatility of the S&P 500 index.

DE’s IV stands in the 86th percentile of its annual range and the 88th percentile of its most recent broad movement.

The price used for analysis was $112.56.

Premium: $5.02 Expire OTM  
DE-iron fly Strike Odds Delta
Long 122.00 91.8% 9
Break-even 118.02
Short 113.00 53.1% 49
Short 113.00 46.8% 51
Break-even 107.02
Long 102.00 90.7% 8

The premium is 50% of the width of the position’s wings.

The risk/reward ratio is 1.2:1.

Decision for My Account

I have entered an order on DE as described above. The stock at the time of entry was priced at $112.73.

By Tim Bovee, Portland, Oregon, May 18, 2017

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