DE Analysis

Deere & Co. (DE)

Update 8/21/2017: DE hit its earnings mark almost perfectly, at $1.97 per share, but fell $12 in trading after the announcement, recovering about a third of the decline as trading progressed in the first post-earns session. I exited for a loss less than a week before the options expire.

Shares showed a net decline of 7.2% over my four-day holding period, or a -661% annual rate. The options position produced a -39.4% loss for a -3,598% annual rate.

DE publishes earnings on Friday before the opening bell.

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

Implied volatility stands at 27%, which is double the VIX, a measure of the volatility of the S&P 500 index.

DE’s IV stands in the 74th percentile of its annual range and the 68th percentile of its most recent broad movement.

The price used for analysis was $125.17.

Premium: $5.36 Expire OTM  
DE-iron fly Strike Odds Delta
Long 136.00 91.2% 10
Break-even 131.36 ~78.0 ~25
Short 126.00 54.0% 48
Short 126.00 45.9% 52
Break-even 121.36 ~70.0% ~27
Long 116.00 88.1% 11

The premium is 54% of the width of the position’s wings.

The risk/reward ratio is 0.9:1.

The expected move is $4.90 wither way, within the $5 break-even width.

Decision for My Account

I have entered an order on DE as described above. The stock at the time of entry was priced at $125.47.

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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