DRI Trade

Darden Restaurants Inc. (DRI)

Update 12/23/2021: I exited my short iron condor position on DRI 29 days before expiration, for a $2.05 debit per contract/share, a profit before fees of $68 per contract. Shares were trading at $147.08, down $1.15 from the entry level.

The Implied Volatility Rank at exit was 35.9%, down 31.9 points from the entry level.

I exited because the position reached 25% of maximum potential profit, my normal exit point for earnings plays.

Shares declined by 0.8% over seven days for a +41% annual rate. The options position produced a 33.2% return for a +1,730% annual rate.


I have entered a short iron condor spread on DRI, using options that trade for the last time 36 days hence, on January 21. The premium is a $2.73 credit per contract share and the stock at the time of entry was priced at $148.23.

The Implied Volatility Ratio stands at 67.8%

Premium:$2.73Expire OTM
DRI-iron condorStrikeOddsDelta
Calls
Long160.0078.0%26
Break-even157.7358.5%31.5
Short155.0039.0%37
Puts
Short140.0063.0%32
Break-even137.7367.5%28
Long135.0072.0%24

The premium is 54.6% of the width of the position’s short/long spread. The profit zone covers a 6.4% move to the upside and a 7.6% move to the downside, for total coverage of 14%.

The risk/reward ratio is 0.8:1, with maximum risk of $227 and maximum reward of $273 per contract.

How I chose the trade. DRI publishes earnings after the opening bell on Friday, December 17. This position covers the expected move post-earnings as implied by the pricing for options expiring December 17. The expected move would keep the price between $140.52 and $155.90.

By Tim Bovee, Portland, Oregon, December 16, 2021

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.

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Based on a work at www.timbovee.com.

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