ADM Analysis

Archer-Daniels-Midland Co. (ADM)

Update 8/2/2017: ADM rose sharply after earnings were published and then moved back toward my short strikes, allowing an exit at 24.7% of maximum potential profit.

Shares produced a net rise on my position of 1.3% over two days, or a +243% annual rate. The options position produced a 32.8% yield on debit for a +5,981% annual rate.

ADM publishes earnings on Tuesday before the opening bell.

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

Implied volatility stands at 25%, which is 2.4 times the VIX, a measure of the volatility of the S&P 500 index.

ADM’s IV stands in the 57th percentile of its annual range and the 88th percentile of its most recent broad movement.

The price used for analysis was $41.99.

Premium: $1.58 Expire OTM  
ADM-iron fly Strike Odds Delta
Long 45.00 90.0% 11
Break-even 87.00
Short 42.00 49.5% 53
Short 42.00 50.6% 47
Break-even 40.58
Long 39.00 88.9% 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 ADM as described above. The stock at the time of entry was priced at $42.08.

By Tim Bovee, Fukuoka, Japan, July 31, 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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