DVN Analysis

Devon Energy Corp. (DVN)

Update 4/2/2018: The broad market decline that began in late January added another down day to the charts, and DVN like most stocks was part of it. I exited for a $0.23 debit, or 59.6% of maximum potential profit, with shares at $30.44.

Shares declined by 5.2% over my 17-day holding period, or a -112% annual rate. The options position produced a 147.9% return for a +3,174% annual rate.


I have entered a short vertical spread on DVN, using options that trade for the last time 35 days hence, on April 20. The premium is a $0.57 credit and the stock at the time of entry was priced at $32.12.

I made the decision to enter the trade in my account based on implied analyst expectations of a negative earnings surprise, a downtrend in the stock price within the context of a bearish market..

DVN publishes earnings on May 1 after the closing bell.

Implied volatility stands at 46%, which is 2.3 times the VIX, a measure of the volatility of the S&P 500 index.

DVN’s IV stands higher than 45% of its daily readings over the past year and stands in the 43rd percentile of its most recent broad movement..

The price used for analysis was $32.15.

Premium: $0.57 Expire OTM  
DVN-bear call spread Strike Odds Delta
Calls
Long 35.00 81.0% 22
Break-even 32.43 71.7% 32
Short 33.00 62.3% 42

The premium is 57% of the width of the position’s wings.

The risk/reward ratio is 2.5:1.

The bid/ask spread was 3.5%.

By Tim Bovee, Portland, Oregon, March 16, 2018

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.

4 thoughts on “DVN Analysis

  1. Tim, over the last 12 months, entering a short 40 delta, long 20 delta call spread that expires in 35 days has won 6 times and lost 5 times, and shows a net loss on those 11 trades of about 18%. The short 30-20 delta call spread over the same period has 8 wins, 3 losses for a net profit of about 10%. Good trading….Karl

    Liked by 1 person

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