AutoZone Inc. (AZO)
AZO publishes earnings on Tuesday before the opening bell.
I shall use the series of monthly options that trade for the last time 25 days hence, on June 19.
Implied volatility stands at 25%, which is 2.2 times the VIX, a measure of the volatility of the S&P 500 index.
AZO’s IV stands in the 77th percentile of its annual range and the 78th percentile of its most recent broad movement.
The price used for analysis was $665.45.
The premium is 54% of the width of the position’s wings.
The risk/reward ratio is 1:1.
Decision for My Account
If AZO were a cheaper stock, I would take this trade. However, at $665 per share, a single iron condor presents more than $3,000 in risk. My model is small trades — with risk of $500-$700, so the AZO trade would be as much as six times my guidelines. Therefore, I am passing on the trade.However, it would certainly be suitable for traders with a higher risk model.
And a shoutout to CEO William Rhodes: Time for stock split, yes?
By Tim Bovee, Portland, Oregon, May 22, 2017