I have entered a short bear call vertical spread on FDEX, using options that trade for the last time 37 days hence, on April 21. The premium is a $2.39 credit per contract share and the stock at the time of entry was priced at $194.51.
The Implied Volatility Ratio stood at 52.3%.
|FDX-bear call spread||Strike||Odds||Delta|
The premium is 95.6% of the width of the position’s short/long spread. The profit zone covers a 1.5% move to the upside and an unlimited move to the downside.
The risk/reward ratio is 1.1:1, with maximum risk of $261 and maximum reward of $239 per contract.
How I chose the trade. The trade was placed to coincide with FDX’s earnings announcement, after) the closing bell on the day after entry. The short strikes were set to coincide with the expected move of $10.07 either way, based on options pricing, which gives a price range of $184.94 to $204.08. The Zacks Investment Research earnings surprise predictor gave FDX a score of -1.41%, with a rank of 3(hold).
By Tim Bovee, Portland, Oregon, March 15, 2023
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.
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.
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