AMAT Analysis

Applied Materials Inc. (AMAT)

Update 8/18/2017: AMAT’s earnings beat analysts expectations by 2 cents, at $0.86 per share. The stock price rose  b6 $2 pre-market trading. I exited at $1.75, or 17.5% of maximum potential profit, with the stock at $44.72.

Shares rose by a a net 2.2% during my one-day holding period, or a +792% annual rate. The options position produced a 21.1% return for a +7,717% annual rate

AMAT publishes earnings on Thursday after the closing bell.

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

Implied volatility stands at 37%, which is 2.8 times the VIX, a measure of the volatility of the S&P 500 index.

AMAT’s IV stands in the 86th percentile of its annual range and the 93rd percentile of its most recent broad movement.

The price used for analysis was $43.65.

Premium: $1.12 Expire OTM  
AMAT-iron fly Strike Odds Delta
Long 48.00 86.8% 12
Break-even 45.12 ~68.0% ~35
Short 44.00 53.0% 49
Short 44.00 46.2% 51
Break-even 41.12 ~78.0% ~19
Long 40.00 90.8% 10

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

The risk/reward ratio is 0.9:1.

The expected move is $1.73 either way, within the $2 breakeven width.

Decision for My Account

I have entered an order on AMAT as described above. The stock at the time of entry was priced at $43.77.

By Tim Bovee, Portland, Oregon, Aug. 17, 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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