Update Oct. 1, 2018: I exited NKE for a $2.45 debit, a $0.64 profit on the options, with shares trading at $83.43, which $1.08 below the entry price. The share close $1.05 below the short calls strike price.
Implied volatility was 22% when i exited, eight points below its entry level.
I exited at 20.7% of maximum profit. That was below my target, 25% of max, due to difficulties on my part in correctly using the TastyWorks brokerage interface.
Shares declined by 1.3% over seven days, or a -67% annual rate. The options position produced a 26.1% return for a +1,362% annual rate.
I have entered a short iron fly spread on NKE, using options that trade for the last time 24 days hence, on Oct. 19. The premium is a $3.09 credit and the stock at the time of entry was priced at $84.51.
I made the decision to enter the trade in my account based on proximity to an earnings announcement, on Sept. 25 after the closing bell..
The profit zone for this position is between $87.59 on the upside and $83.59 on the downside.
Implied volatility stands at 30%, which is 2.4 times the VIX, a measure of the volatility of the S&P 500 index. NKE’s IV rank stands at 81.6%
The price used for analysis was $84.49.
The premium is 77% of the width of the position’s wings.
The risk/reward ratio is 0.2:1, with a maximum potential loss of $6.60 per share and a maximum potential gain of $3.09.
The bid/ask spread was 3.2%.
By Tim Bovee, Portland, Oregon, Sept. 25, 2018
Based on a work at www.timbovee.com.