DLTR Analysis

Dollar Tree Inc. (DLTR)

Update 5/25/2017: DLTR declined sharply after earnings were published, and I exited a 42.1% of maximum potential profit. In the hour after my exit it rose sharply. Both the decline and the increase remained within the boundaries of my position’s wings.

Shares at exit had declined by 0.1% from when I entered the day before, or a -40% annual rate. The options position produced a +72.6% yield on debit for a +26,496% annual rate.

DLTR publishes earnings on Thursday before the opening bell.

I shall use the series of monthly options that trade for the last time nine days hence, on June 2.

Implied volatility stands at 34%, which is 3.3 times the VIX, a measure of the volatility of the S&P 500 index.

DLTR’s IV stands in the 58th percentile of its annual range and the 86th percentile of its most recent broad movement.

The price used for analysis was $77.99.

Premium: $4.66 Expire OTM  
DLTR-iron fly Strike Odds Delta
Long 88.00 93.2% 8
Break-even 83.16
Short 78.50 54.6% 52
Short 78.50 49.1% 48
Break-even 73.66
Long 69.00 89.0% 9

The premium is 49% of the width of the position’s wings.

The risk/reward ratio is 1:1.

Decision for My Account

I have entered an order on DLTR as described above. The stock at the time of entry was priced at $78.09.

By Tim Bovee, Portland, Oregon, May 24, 2017

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