TV Analysis

Grupo Televisa S.A.B. (TV)

TV publishes earnings on Monday after the closing bell.

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

Implied volatility stands at 32%, which is 2.9 times the VIX, a measure of the volatility of the S&P 500 index.

TV’s IV stands in the 52nd percentile of its annual range and the 92nd percentile of its most recent broad movement.

The price used for analysis was $25.32.

Premium: $0.80 Expire OTM  
TV-iron fly Strike Odds Delta
Long 27.00 79.8% 23
Break-even 25.80
Short 25.00 41.9% 61
Puts
Short 25.00 58.4% 39
Break-even 24.80
Long 24.00 79.3% 19

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

The risk/reward ratio is 1.5:1.

Decision for My Account

I am passing on this trade. The options grid isn’t liquid enough to allow me to construct a position that meets my standards.

There are two difficulties.

One is the span between the market price and the nearest strike prices for the short options is overly broad, with a 61 delta for the call and a 39 delta for the put. My goal for the iron fly structure is always to get as close to a 50 delta on each as possible.

The second is that the options grid forces me to use narrow wings on the iron fly. The bid goes to zero one strike away from the long calls and puts I have used, leaving me well above my target delta 10 for the wings.

The risk is a risk/reward ratio of 1.5:1, whereas my maximum allowable for an iron fly is 1.2:1.

I find the grid to be untradeable at this time.

By Tim Bovee, Portland, Oregon, July 10, 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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