Citigroup Inc. (C)

Lot 2022-2

Update 7/15/2022: I exited my short bull put vertical spread on C, 35 days before expiration, for a $0.59 debit per contract/share, a profit before fees of $69 per contract. Shares were trading at $46.92, up $3.36 from the entry level.

The Implied Volatility Rank at exit was 55.2%, down 17.2 points from the entry level.

I exited on the day after entry at 53.9% of maximum potential profit, well above my normal exit point for earnings plays, 25% of max.

Shares rose by 7.7% over one day for a +2,815% annual rate. The options position produced a 116.9% return for a +42,686% annual rate.

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I have entered a short bull put vertical spread on C, using options that trade for the last time 36 days hence, on August 19. The premium is a $1.28 credit per contract share and the stock at the time of entry was priced at $43.56.

The Implied Volatility Ratio stood at 72.4%.

Premium:	$1.28	Expire OTM
C-bull put spread	Strike	Odds	Delta
Puts
Long	37.50	81.0%	15
Break-even	43.53	67.5%	27
Short	42.25	54.0%	39

The premium is 53.9% of the width of the position’s short/long spread. The profit zone covers a 0.1% move to the downside and an unlimited move to the upside.

The risk/reward ratio is 2.7:1, with maximum risk of $347 and maximum reward of $127 per contract.

How I chose the trade. The trade was placed to coincide with C’s earnings announcement, before the opening bell on the day after entry. The short strikes were set to coincide with the expected move of $1.57 either way, based on options pricing, which gives a price range of $41.99 to $45.13.

By Tim Bovee, Portland, Oregon, July 14, 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.

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