GIS Analysis

General Mills Inc. (GIS)

GIS publishes earnings on Thursday before the opening bell.

I shall use options that trade for the last time 24 days hence, on July 21.

Implied volatility stands at 26%, which is 2.4 times the VIX, a measure of the volatility of the S&P 500 index.

GIS’s IV stands in the 58th percentile of its annual range and the 54th percentile of its most recent broad movement.

The price used for analysis was $55.78.

Premium: $2.21 Expire OTM  
GIS-iron fly Strike Odds Delta
Long 60.00 86.2% 15
Break-even 57.21
Short 55.00 41.6% 60
Short 55.00 56.5% 40
Break-even 52.21
Long 50.00 92.5% 6

The premium is 44% of the width of the position’s wings.

The risk/reward ratio is 1.3:1.

Decision for My Account

For the iron fly structure, my rule of thumb is a risk/reward ratio of no more than 1.2:1. The best structure I can use produces a 1.3:1 ratio. I am passing on this trade.

By Tim Bovee, Portland, Oregon, June 27, 2017


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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