Another volatility spike

5 Jan 2017

Same story as Macy's:
- Disappointing Christmas sales
- Disappointing, revised guidance
- Double broker downgrade

Stock indicated down 15%
Wide gap (46-49) to be bridged
Volatility should spike accordingly
Opportunity to sell 10% OTM puts on the 20 Jan maturity

9 Jan 2017

Dagangan aktif

At the close of last week, the 5d historical volatility had tripled to 183% from its 50d level of 67%. This is definitely the type of spike we would like to take advantage of. I highlight below 3 puts worth selling, with indicative closing prices from the previous session. The third gives earnings exposure (earnings publication expected Feb 23rd).

1. Sell KSS 20Jan'17 PUT $40 = $0.70/share => 1.69% in 11 days or 56.06% p.a.
2. Sell KSS 17Feb'17 PUT $37.50 = $0.75/share => 1.81% in 39 days or 16.94% p.a.
3. Sell KSS 21Apr'17 PUT $37.50 = $2.05/share => 4.95% in 102 days or 17.71% p.a.