KBH Analysis

KB Home (KBH)

Update 7/14/2017; KBH rose after earnings were published and thenmoved into a sideways pattern, repeatedly moving into profitability but staying short of my target of 25% of maximum potential profit. As expiration approached I exited at 16.9% of maximum potential profit.

Shares rose by 4.7% over 18 days, or a +96% annual rate. The options position produced a +20.4% yield on debit for a +414% annual rate.


KBH publishes earnings on Tuesday before the opening bell.

I shall use options that trade for the last time 25 days hence, on July 21.

Implied volatility stands at 34%, which is 3.5 times the VIX, a measure of the volatility of the S&P 500 index.

KBH’s IV stands in the 43rd percentile of its annual range and the 95th percentile of its most recent broad movement.

The price used for analysis was $22.67.

Premium: $1.18 Expire OTM  
KBH-iron fly Strike Odds Delta
Long 25.00 89.1% 13
Break-even 24.18
Short 23.00 58.1% 46
Puts
Short 23.00 42.2% 54
Break-even 23.18
Long 22.00 77.6% 20

The premium is 79% of the width of the position’s wings.

The risk/reward ratio is 0.7:1.

Decision for My Account

A wider distance from at-the-money to the surrounding strike prices and constraints on strike selection made this a somewhat distorted trade. Nonetheless, I have entered an order on KBH as described above. The stock at the time of entry was priced at $22.67.

By Tim Bovee, Portland, Oregon, June 26, 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.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

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