SCHW Analysis

The Charles Schwab Corp. (SCHW)

Update 10/17/2017: SCHW’s earnings matched the consensus forecast, and prices fluctuated in a range that remained within the profit zone. I exited at 8.8% of maximum potential profit, below my target of 25%.

SCHW’s share price stayed within the zone of profit after earnings were published and came close to the central tendency of the last four post-earns movements. Zacks‘ earnings surprise predictor had given SCHW a 0.20 positive score.

Shares rose by 0.3% over my four-day holding period, or a +29% annual rate. The options position prouced a 9.6% return for a +879% annual rate.


SCHW publishes earnings on Monday before the opening bell.

I shall use options that trade for the last time 14 days hence, on Oct. 27.

Implied volatility stands at 24%, which is 2.5 times the VIX, a measure of the volatility of the S&P 500 index.

SCHW’s IV stands in the 69th percentile of its annual range and the 28th percentile of its most recent broad movement.

The price used for analysis was $44.75.

Premium: $1.48 Expire OTM
SCHW-iron fly Strike Odds Delta
Calls 48.00 91.6% 9
Break-even 46.48
Short 45.00 56.8% 45
Puts
Short 45.00 43.0% 55
Break-even 43.48
Long 42.00 86.6% 12

The premium is 49.3% of the width of the position’s wings.

The risk/reward ratio is 1:1.

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 $0.77, and the average was $0.34. After eliminating the maximum and minimum post-earnings movements, the central tendency is $0.26.

The expected move covering 85% of occurrences is $1.46, within /the profit zone.

The bid/ask spread is 20%.

Decision for My Account

Although the bid/ask spread is a bit wider than I like, the expected move and post-earns historical moves make the trade attractive. I have entered a position on SCHW as described above. The stock at the time of entry was priced at $44.68.

By Tim Bovee, Portland, Oregon, October 13, 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.

 

3 thoughts on “SCHW Analysis

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s