HAL Analysis – passed

Halliburton Co. (HAL)

I have declined to take a short iron fly options spread on HAL, using options that trade for the last time 28 days hence, on Nov. 16.

The strike prices on the options are $2.50 apart and are situated so that they are some distance from the at-the-money price. That sort of distortion makes an iron fly difficult to construct without biasing the profit zone in one direction or the other.

I  considered the trade in conjunction with an earnings announcement on Monday, Oct. 22, before the opening bell.

The profit zone for this position is between $41.79 on the upside and $39.29 on the downside.

Implied volatility stands at 35%, which is 1.9 times the VIX, a measure of the volatility of the S&P 500 index.

HAL’s IV stands higher than 68% of its daily readings over the past year.

The price used for analysis was $38.65.

Premium: $1.79 Expire OTM
HAL-iron fly Strike Odds Delta
Long 42.50 86.0% 15
Break-even 41.79 75.5% 27
Short 40.00 65.0% 38
Short 40.00 34.0% 63
Break-even 39.29 48.5% 49
Long 37.50 63.0% 34

The premium is 72% of the width of the position’s wings.

The risk/reward ratio is 0.4:1, with maximum potential risk of $71 per contract and maximum potential reward of $179 per contract.

The bid/ask spread was 2.8%.

By Tim Bovee, Portland, Oregon, Oct. 19, 2018


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.

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