Update 4/29/2022: I exited my short bull put vertical spread on KO, 50 days before expiration, for a $1.53 debit per contract/share, a loss before fees of $43 per contract. Shares were trading at $64.82, down $1.19 from the entry level.
The Implied Volatility Rank at exit was 68.4%, up 14 points from the entry level.
I exited because the position for a loss after seven days because there was no sign of improvement on the chart and I wanted to avoid higher losses.
Shares decline by 1.8% over seven days for a -94% annual rate. The options position produced a 28.1% loss for a 1,466% annual rate.
I have entered a short bull put options spread on KO, using options that trade for the last time 56 days hence, on June 17. The premium is a $1.10 credit per contract share and the stock at the time of entry was priced at $66.01.
The Implied Volatility Ratio stood at 54.4%.
|KO-bull put spread||Strike||Odds||Delta|
The premium is 44.0% of the width of the position’s short/long spread. The profit zone covers less than a quarter of a percent of a move to the downside and an unlimited move to the upside.
The risk/reward ratio is 3.5:1, with maximum risk of $390 and maximum reward of $110 per contract.
How I chose the trade. The trade was placed to coincide with KO’s earnings announcement, before the opening bell on Monday, April 25, after the weekend. The short strike was set to coincide with the expected move of $1.77 either way, based on options pricing, which gives a price range of $64.66 to $67.14.
By Tim Bovee, Portland, Oregon, April 22, 2022
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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