JBL Analysis

Jabil Inc. (JBL)

Update 9/22/2017: I rolled out of JBL this morning, for a $1.75 debit with shares priced at $29.75,  because of the change in earnings publication date. I shall consider re-entering on Wednesday, Sept. 27. If I do re-enter, then I shall treat today’s exit as a roll. If I decline to re-enter, then I shall treat today’s exit as the end of the trade and at that time shall calculate results.


Update 9/21/2017: JBL moved its earnings announcement to Wednesday, Sept. 27, two days before the options in my position expire. I shall roll the position forward to a later expiration, probably the options expire Oct. 6.


JBL publishes earnings on Wednesday (Sept. 27 — see update above)) after the closing bell.

I shall use options that trade for the last time nine days hence, on Sept. 29. (See update above.)

Implied volatility stands at 35%, which is 3.5 times the VIX, a measure of the volatility of the S&P 500 index.

JBL’s IV stands in the 73rd percentile of its annual range and at the peak of its most recent broad movement.

The price used for analysis was $30.54.

Premium: $1.58 Expire OTM  
JBL-iron fly Strike Odds Delta
Long 33.50 90.3% 11
Break-even 32.08 ~74.0% ~29
Short 30.50 53,8% 49
Puts
Short 30.50 46.1% 51
Break-even 29.08 ~69.0 ~28
Long 27.50 83.4% 14

The premium is 52.7% of the width of the position’s wings.

The risk/reward ratio is 0.9:1.

The zone of profit in the proposed trade covers a $1.50 move either way. The biggest immediate move after each of the past four earnings announcements was $2.58, and the average was $1.60. After eliminating the maximum and minimum post-earnings movements, the central tendency is $1.31.

The expected move covering 85% of occurrences is $1.70, within the $1.50 break-even width.

The bid/ask spread is 22.2%.

Decision for My Account

The bid/ask spread is a bit wide, and the expected move is wider than the profit zone by about 20 cents either way. However, once the outliers are removed the central tendency of movements after earnings announcements is within the profit zone.

The central tendency and the favorable risk/reward ratio persuades me that the risk is worth accepting. Therefore, I have entered an order on JBL as described above. The stock at the time of entry was priced at $1.58.

By Tim Bovee, Portland, Oregon, Sept. 20, 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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