MDT Analysis

Medtronic plc (MDT)

Update 8/24/2017: MDT’s came in at $1.12 per share, slightly above analysts’ consensus estimate of $1.09. The stock price fell by $3+ over two days. (By the way, am I alone in thinking that such counter-intuitive declines show that earnings estimates have little predictive value to trading?)

Zacks Investment Research forecast a positive earnings surprise, with an Earnings Surprise Predictor score of 0.93.

Shares showed a net decline of 5.1% over my three-day holding period, or a -618% annual rate. The options position produced a -42.2% loss for a -5,137% annual rate.

MDT publishes earnings on Tuesday before the opening bell.

I shall use options that trade for the last time 11 days hence, on Sept. 1.

Implied volatility stands at 18%, which is 1.3 times the VIX, a measure of the volatility of the S&P 500 index.

MDT’s IV stands in the 32nd percentile of its annual range and the 57th percentile of its most recent broad movement.

The price used for analysis was $83.82.

Premium: $2.08 Expire OTM  
MDT-iron fly Strike Odds Delta
Long 88.00 90.6% 10
Break-even 86.08 ~77.0% ~24
Short 84.00 53.54 48
Short 84.00 46.6% 52
Break-even 81.08 ~79.0 ~19
Long 79.00 85.9% 13

The premium is 46% of the width of the position’s wings.

The risk/reward ratio is 0.9:1.

The expected move is $1.83, within the $2.50 break-even width.

Decision for My Account

I have entered an order on MDT as described above. The stock at the time of entry was priced at $83.80.

By Tim Bovee, Portland, Oregon, Aug. 21, 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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