WFC Trade

Wells Fargo & Co. (WFC)

Update 1/20/2022: I exited my short iron condor position on WFC 29 days before expiration, for a $1.55 debit per contract/share, a profit before fees of $27 per contract. Shares were trading at $55.99, down $0.30 from the entry level.

The Implied Volatility Rank at exit was 17.3%, down 6.0 points from the entry level.

I exited below my target of 25% of maximum potential profit as a test of a more rapid exit strategy for earnings plays.

Shares declined by 0.5% over seven days for a 28% annual rate. The options position produced a 17.4% return for a 908% annual rate.


I have entered a short iron condor spread on WFC, using options that trade for the last time 36 days hence, on February 18. The premium is a $1.82 credit per contract share and the stock at the time of entry was priced at $56.29.

The Implied Volatility Ratio stands at 23.3%

Premium:$1.82Expire OTM
WFC-iron condorStrikeOddsDelta
Calls
Long65.0094.0%8
Break-even61.8285.5%17.5
Short60.0077.0%27
Puts
Short55.0058.0%38
Break-even51.8271.5%25.5
Long50.0085.0%13

The premium is 36.4% of the width of the positions short and long spreads. The profit zone covers a 9.8% move to the upside and an 8.6% move to the downside.

The risk/reward ratio is 1.7:1, with maximum risk of $318 and maximum reward of $182 per contract.

How I chose the trade. The trade was placed to coincide with WFC’s earnings announcement, before the opening bell on the day after entry. The short strikes were set to coincided with the expected move of $1.85 either way, based on options pricing, which gives a price range of $54.78 to $58.48.

By Tim Bovee, Portland, Oregon, January 13, 2022

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.

2 thoughts on “WFC Trade

  1. […] The options positions were on C and WFC, both structured as iron condors. The implied volatility was a bit lower than I like, but the positions as built have good risk/reward ratios and sufficiently high premium in relation to the width between the short and long options. The short shares position was on FRC, which isn’t liquid enough to meet my standards for options trading. All three companies publish earnings on Friday before the opening bell. I’ve posted full analysis for the options plays, C and WFC. […]

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