UPS Analysis

United Parcel Service Inc. (UPS)

Update 11/8/2018: I have exited UPS for a $610 debit per contract, a $210 profit, with the shares price at $111.30 when I exited, down $2.65 from the entry point.

Shares decline by 2.2% over 16 days, or a -53% annual rate. The options position produced a 34.4% return for a +785% annual rate.

I have entered a short iron fly spread on UPS, using options that trade for the last time 59 days hence, on Dec. 21. The premium is an $8.20 credit and the stock at the time of entry was priced at $113.95.

I entered the trade to coincide with an earnings announcement, on Wednesday, Oct. 24, before the opening bell.

The profit zone for this position is between $123.20 on the upside and $108.20 on the downside.

Implied volatility stands at 22%, which is 1.6 times the VIX, a measure of the volatility of the S&P 500 index.

UPS’s IV stands higher than all of its daily readings over the past year.

The price used for analysis was $113.96.

Premium: $8.20 Expire OTM
UPS-iron fly Strike Odds Delta
Long 130.00 92.6% 9
Break-even 123.20 74.5% 29
Short 115.00 56.3% 48
Short 115.00 43.7% 52
Break-even 108.20 62.7% 34
Long 100.00 81.7% 15

The premium is 54.7% of the width of the position’s wings.

The risk/reward ratio is 0.8:1, with maximum potential risk of $680 per contract and maximum potential reward of $820 per contract.

The bid/ask spread was 2.8%.

By Tim Bovee, Portland, Oregon, Oct. 23, 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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