PEP Analysis

PepsiCo Inc. (PEP)

Update 7/11/2017: PEP fell after earnings were published and I exited at 24.8% of maximum potential profit.

Shares declined by 1.2% over one day, or a 449% annual rate. The options position produced a 33.0% yield on debit for a 12,045% annual rate.

PEP publishes earnings on Tuesday before the opening bell.

I shall use options that trade for the last time 11 days hence, on July 21.

Implied volatility stands at 17%, which is 1.5 times the VIX, a measure of the volatility of the S&P 500 index.

PEP’s IV stands in the 61st percentile of its annual range and the 82nd percentile of its most recent broad movement.

The price used for analysis was $115.41.

Premium: $2.66 Expire OTM  
PEP-iron fly Strike Odds Delta
Long 120.00 88.3% 12
Break-even 117.66
Short 115.00 48.3% 53
Short 115.00 52.1% 46
Break-even 112.66
Long 110.00 89.5% 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 PEP as described above. The stock at the time of entry was priced at $115.39.

By Tim Bovee, Portland, Oregon, July 10, 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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