Update 9/22/2022: I exited my short bull put vertical spread on DRI, 29 days before expiration, for a $2.92 debit per contract/share, a loss before fees of $102 per contract. Shares were trading at $125.38, down $6.68 from the entry level.
The Implied Volatility Rank at exit was 32.8%, down 12.1 points from the entry level.
DRI’s earnings came in as expected, at $1.56 per share, but some same-store sales fell short and the share price fell, turning my bear position unprofitable. I exited on the day after entry for 81.8% of maximum potential loss.
Shares fell by 5.1% over one day for a -1,846% annual rate. The options position produced a 34.9% loss for a -12,750% annual rate.
I have entered a short bull put vertical spread on DRI, using options that trade for the last time 30 days hence, on October 21. The premium is a $1.90 credit per contract share and the stock at the time of entry was priced at $132.06.
The Implied Volatility Ratio stood at 44.9%.
|DRI-bull put spread||Strike||Odds||Delta|
The premium is 76% of the width of the position’s short/long spread. The profit zone covers a 5% move to the downside and an unlimited move to the upside.
The risk/reward ratio is 1.6:1, with maximum risk of $190 and maximum reward of $360 per contract.
How I chose the trade. The trade was placed to coincide with DRI’s earnings announcement, before the opening bell on the day after entry. The Zacks Investment Research earnings surprise predictor gave DRI a score of 0.21%, with a rank of 3. The analysts’ consensus is that DRI will announce earnings of $1.56 per share.
By Tim Bovee, Portland, Oregon, September 21, 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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