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.
| Premium: | $29.47 | Expire OTM | |
| AZO-iron fly | Strike | Odds | Delta |
| Long | 720.00 | 93.5% | 7 |
| Break-even | 699.47 | ||
| Short | 670.00 | 56.0% | 47 |
| Puts | |||
| Short | 670.00 | 43.9% | 54 |
| Break-even | 639.47 | ||
| Long | 610.00 | 87.5% | 11 |
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
Tim Bovee, Private Trader 
[…] a position on AAPL as a volatility play without an associated earnings announcement. My analyze of AZO showed it to be a reasonable trade, although I passed on it for my accounts because of the high […]
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