JBL Analysis

Jabil Inc. (JBL)

Update 12/15/2017: JBL’s earnings of $0.80 per share came in 1.6% below the Street estimate of $0.81. Shares rose a dollar in after-hours trading after the announcement, stayed high overnight, and then a dollar in the 10 minutes before the opening bell and the first 10 minutes of the session. I exited soon after the open at 31.5% of maximum potential profit.

Shares rose by 1.7% during my holding period of less than a day, or a +637% annual rate. the options position produced a 46% return for a +16,790% annual rate.

Going into the trade Zacks gave JBL a neutral rank (3) with no expectation of an earnings surprise. The average directional index (ADX) stood at 17.4, with a directional index gap (+DI minus -DI) of -7.48, a bearish reversal. The ADX stood in the 45th percentile of its most recent broad movement.

JBL rose $0.42 from the pre-earns close to the end of the trading the first session after the announcement, stay well within the $1.54 average movement of the past four announcements, the central tendency of $1.24 and the maximum of $2.58.

The expected move of $1.55 contained JBL’s maximum rise of $1.13, which also stayed within the upside profit zone, $1.46.


JBL publishes earnings on Thursday after the closing bell.

I shall use options that trade for the last time eight days hence, on Dec. 22.

Implied volatility stands at 36%, which is 3.5 times the VIX, a measure of the volatility of the S&P 500 index.

JBL’s IV stands in the 78th percentile of its annual range and the 82nd percentile of its most recent broad movement.

The price used for analysis was $27.50.

I shall use a direction-neutral iron fly structure for the position.

Premium: $1.46 Expire OTM
JBL-iron fly Strike Odds Delta
Calls
Long 30.00 85.4% 17
Break-even 28.96 75.0% 28
Short 27.50 51.5% 52
Puts
Short 27.50 48.3% 48
Break-even 26.46 64.0% 32
Long 25.00 84.5% 13

The premium is 58.4% of the width of the position’s wings.

The risk/reward ratio is 0.7:1.

The zone of profit in the proposed trade covers a $1.46 move to the upside and $1.04 to the downside. The biggest immediate move after each of the past four earnings announcements was $2.58, and the average was $1.54. After eliminating the maximum and minimum post-earnings movements, the central tendency is $1.24.

The expected move covering 85% of occurrences is $1.55, 9 cents beyond the profit zone to the upside and 51 cents to the downside.

The bid/ask spread is 17.2%.

Decision for My Account

I have entered a position on JBL as described above. The stock at the time of entry was priced at $27.51.

I may regret it. The bid/ask spread is too wide and the profit-zone coverage, especially to the downside, is less than I would like. Nonetheless, I have jumped in, perhaps because the lack of decent options trades over the past few weeks has left me willing to bend my standards a bit.

By Tim Bovee, Portland, Oregon, Dec. 14, 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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