Applied Materials Inc. (AMAT)
Update 5/19/2017: AMAT’s shares rose sharply after earnings were published and then took most of it back in an immediate retracement. I exited for a debit of $1.64, or 29.6% of maximum potential profit.
Shares had risen by 1.9% at exit over my entry price a day earlier, or a +689% annual rate. The optoins position produced a +40.4% yield on debit for a +15,736% annual rate.
AMAT publishes earnings on Thursday after the closing 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 44%, which is times the VIX, a measure of the volatility of the S&P 500 index.
AMAT’s IV stands in the 75th percentile of its annual range and the 89th percentile of its most recent broad movement.
The price used for analysis was $43.57.
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 AMAT as described above. The stock at the time of entry was priced at $43.72.
By Tim Bovee, Portland, Oregon, May 18, 2017