ADI Analysis

Analog Devices Inc. (ADI)

Update 5/31/2017: ADI gapped to the upside after earnings were published and the pulled back. I exited at 27.1% of maximum potential profit.

Shares produced a net rise of 1.9% over one day, or a +692% annual rate. The options position produced a 37.2% yield on debit for a +13,586% annual rate.

ADI publishes earnings on Wednesday before the opening bell.

I shall use options that trade for the last time 17 days hence, on June 16.

Implied volatility stands at 32%, which is 3.1 times the VIX, a measure of the volatility of the S&P 500 index.

ADI’s IV stands in the 65th percentile of its annual range and the 80th percentile of its most recent broad movement.

The price used for analysis was $84.93.

Premium: $4.94 Expire OTM  
ADI-iron fly Strike Odds Delta
Long 91.00 92.8% 8
Break-even 89.94
Short 85.00 51.7% 51
Short 85.00 48.1% 49
Break-even 79.94
Long 75.00 91.5% 7

The premium is 62% 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 ADI as described above. The stock at the time of entry was priced at $84.97.

By Tim Bovee, Portland, Oregon, May 30, 2017

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