Scientific Games Corp. (SGMS)

Update 3/14/2017: SGMS began a steady declined after earnings were published. I exited at 23.0% of maximum potential profit.

Shares declined by 1.5% over 12 days, or a -47% annual rate. The options position produced a +29.9% yield on debit for a +910% annual rate.

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SGMS publishes earnings on Thursday after the closing bell.

I shall use the APR series of options, which trades for the last time 50 days hence, on April 21.

Implied volatility stands at 64%, which is 5.6 times the VIX, a measure of the volatility of the S&P 500 index.

SGMS’s IV stands in the 29th percentile of its annual range and the 67th percentile of its most recent broad movement.

The price used for analysis was $21.13.

Premium:	$2.91	Expire OTM	iron fly
SGMS		Odds	Delta
Calls
Long	27.00	91.3%	12
Break-even	23.91
Short	21.00	53	55
Puts
Short	21.00	47.0%	45
Break-even	18.09
Long	15.00	89.3%	7

The premium is 49% of the width of the position’s wings.

The risk/reward ratio is 1.1:1.

Decision for My Account

I have entered a position on SGMS as described above. The stock at the time of entry was priced at $21.13.

By Tim Bovee, Portland, Oregon, March 2, 2017