Red Hat Inc. (RHT)

Update 6/26/2017: Shares gapped sharply upward after earnings were published and remained in that high range thereafter. I exited for a profit as expiration approached

Shares rose by 8.4% over six days, or a +511% annual rate. The options position produced a -2.4% los son debit for a -1,729% annual rate.

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RHT publishes earnings on Tuesday after the market close.

I shall use options that trade for the last time 10 days hence, on June 30.

Implied volatility stands at 35%, which is 3.3 times the VIX, a measure of the volatility of the S&P 500 index.

RHT’s IV stands in the 75th percentile of its annual range and the 76th percentile of its most recent broad movement.

The price used for analysis was $90.79.

Premium:	$5.29	Expire OTM
RHT-iron fly	Strike	Odds	Delta
Long	101.00	90.7%	11
Break-even	96.29
Short	91.00	52.7%	51
Puts
Short	91.00	47.4%	49
Break-even	86.29
Long	81.00	88.1%	10

The premium is 53% of the width of the position’s wings.

The risk/reward ratio is 0.9:1.

Decision for My Account

I have entered an order on RHT as described above. The stock at the time of entry was priced at $90.78.

By Tim Bovee, Portland, Oregon, June 20, 2017

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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Based on a work at www.timbovee.com.