Live: Thursday, March 9, 2017

3/9 – 7 p.m. New York time.

Neither of my attempted exits were filled.

3/9 – 3:40 p.m. New York time

I am wrapping up the day, with one new position in my portfolio — an earnings play on PAY — and two exits, a long shot on ADSK and a possible fill on SGMS — on order that I shall leave active until the closing bell. I shall post an update if either goes through.

3/9 – 9:45 a.m. New York time

Implied volatility on PAY is little changed from yesterday’s market close, and it continues to qualify for further analysis and potentially a trade.

My goal is to enter a trade as close to the earnings announcement as is practical, so I shall post the analysis and place any order within a couple of hours of the closing bell.

3/8 – 3:30 p.m. New York time

VeriFone Systems Inc. — symbol PAY —  is a potential trade for analysis on Thursday. I had had marked it as having an insufficiently liquid options grid, but it has improved, and I think I can make it work.

There is, however, a degree of ambiguity in the implied volatility level. The annual range calculation — the 46th percentile in this case — is straightforward: Where does IV stand in relationship to the low and the high points of the past 12 months.

The calculation is more flexible with the most recent broad movement. After all, what constitutes a sufficiently broad movement to qualify? It’s in the eye of the beholder.

PAY_20170308

For example, in the one-year PAY chart above, if I use the range in the yellow oval, I have PAY in the 38th percentile of the most recent broad movement. If I use the blue one, then it is in the 80th percentile. Which is correct? Well, honestly, who can say? They both are.

IV across the annual range, unambiguously, is in the 46th percentile. I require the 50th percentile or better, so based on the annual range, PAY not doesn’t qualify for further analysis.

Based on the most recent movement, if I use use the yellow range, then PAY doesn’t qualify, and I drop it. With the blue range, it qualifies handily, and I go for the analysis and perhaps the trade.

My rule of thumb in these matter is that if a retracement comes close to a boundary of the prior range, then I’ll use the more recent range. That’s what has happened here, so I’m using the range marked by the blue oval and shall analyze PAY on Thursday.

Tim Bovee, Portland, Oregon, March 8-9, 2017

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