MDT Analysis

Medtronic plc. Ordinary Shares (MDT)

Update 5/25/2017: MDT whipsaws after earnings were published, rising and then falling, and then rising again to recover most of the decline. I exited at slightly below my entry price, at 40.1% of maximum potential profit.

From entry the day before to exit shares had a net declined by 0.5%, or a -176% annual rate. The optons position produced a 66.9% yeld on debit for a +24,417% annual rate.

MDT 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 20%, which is 1.9 times the VIX, a measure of the volatility of the S&P 500 index.

MDT’s IV stands in the 37th percentile of its annual range and the 84th percentile of its most recent broad movement.

The price used for analysis was $84.90.

Premium: $2.42 Expire OTM  
MDT-iron fly Strike Odds Delta
Long 90.00 92.6% 8
Break-even 87.42
Short 85.00 53.0% 49
Short 85.00 47.0% 51
Break-even 82.42
Long 80.00 88.7% 10

The premium is 48% of the width of the position’s wings.

The risk/reward ratio is 1.1:1.

Decision for My Account

I have entered an order on MDT as described above. The stock at the time of entry was priced at $84.91.

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

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