Pepsico Inc. (PEP)

Update 10/4/2017: PEP reported earnings of $1.48, compared to a Street estimate of $1.45. The stock was $2.15 below my entry price at the time I exited, with the options position at 8.5% of maximum potential profit, well below my 25% target.

The declined was greater than the average over the prior four earnings announcements, and far greater than the central tendency. The expected move, $2.21, proved to be almost on the money, and in the future I shall give that greater weight in my decision making.

My experience has been that waiting to exit will rarely turn a sow’s ear into a silk purse. The main question is when during the day after earnings should I exit. In this case, I could have improved by results by a bit had I waited an hour. Even so, I couldn’t read the future an hour ago, and I shall never regret taking my profit off the table. It’s not always the most profitable decision, but it is the most prudent.

Shares declined by 2.0% over my one-day holding period, or a -718% annual rate. The options position produced a +9.3% return for a 3,387% annual rate.

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PEP publishes earnings on Wednesday before the opening bell.

I shall use options that trade for the last time 10 days hence, on Oct. 13.

Implied volatility stands at 17%, which is 1.8 times the VIX, a measure of the volatility of the S&P 500 index.

PEP’s IV stands in the 65th percentile of its annual range and at the peak of its most recent broad movement.

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Monsanto Co. (MON)

MON publishes earnings on Wednesday before the opening bell.

I shall use options that trade for the last time 10 days hence, on Oct. 13.

Implied volatility stands at 11th%, which is 1.1 times the VIX, a measure of the volatility of the S&P 500 index.

MON’s IV stands in the 30th percentile of its annual range and the 58th percentile of its most recent broad movement.

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10/3 – 3:00 p.m. New York time

I entered one new position today, PEP, and exited it one for a roll, TLT. I also analyzed MON but declined the trade.

I have updated PEP’s analysis with the trade chart.

10/3 – 9:45 a.m. New York time

I have exited my TLT position for a profit and shall roll it forward, probably on Wednesday. I won’t calculate full results until the roll series is complete.

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10/2 – 2:40 p.m. New York time

I’m breaking off a bit early today to head to the Apple stores to get my iPhone repaired. The small-form charing port, present in the iPhone 5 and later, has once again gotten a clogged, no doubt by the dusty residue of expired options. I take the device in to the Apple Store for unclogging about one a year. No idea what they do with the expired options dust.

I had no trades at all today, although TLT is getting within reach of my goal of 50% of maximum potential profit.

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