CPB Analysis

Campbell Soup Co. (CPB)

Update 5/30/2017: CPB whipsawed after earnings were published, quickly declining from my entry point and then reversing to climb above my entry point. It then fell again, and I exited at about the point where I entered, at . Time decay took care of the work of producing a profit of 24.9% of its potential maximum.

Shares showed a net rise of 0.8% over 12 days, or a +23% annual rate. The options position produced a +33.2% yield on debit for a +1,008% annual rate.

CPB publishes earnings on Friday before the opening bell.

I shall use the series of monthly options that trade for the last time 29 days hence, on June 16.

Implied volatility stands at 23%, which is 1.5 times the VIX, a measure of the volatility of the S&P 500 index.

CPB’s IV stands in the 55th percentile of its annual range and the 89th percentile of its most recent broad movement.

The price used for analysis was $57.45.

Premium: $2.35 Expire OTM  
CPB-iron fly Strike Odds Delta
Long 62.50 52.7% 8
Break-even 59.85
Short 57.50 52.6% 50
Short 57.50 47.6% 50
Break-even 54.85
Long 52.50 87.9% 11

The premium is 47% 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 CPB as described above. The stock at the time of entry was priced at $57.46.

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

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