PAY Analysis

VeriFone Systems Inc. (PAY)

Update 3/10/2017: PAY’s implied volatility declined sharply after earnings came in at about half of the Street estimate. I exited at 25% of maximum potential profit the day after entering the position.

Shares declined by 3.9% over a day, or a -1,408% annual rate. The options position produced a 33.3% yield on debit for a +12,167% annual rate.

PAY publishes earnings on Thursday, March 9, after the closing bell.

I shall use the APR series of options, which trades for the last time 43 days hence, on April 21.

Implied volatility stands at 45%, which is 3.6 times the VIX, a measure of the volatility of the S&P 500 index.

PAY’s IV stands in the 46th percentile of its annual range and the 89th percentile of its most recent broad movement.

The price used for analysis was $20.23.

Premium: $1.88 Expire OTM iron fly
PAY   Odds Delta
Long 24.00 91.7% 11
Break-even 21.88
Short 20.00 49.4% 56
Short 20.00 50.7% 44
Break-even 18.12
Long 16.00 91.2% 6

The premium is 47% 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 PAY as described above. The stock at the time of entry was priced at $20.22.

By Tim Bovee, Portland, Oregon, March 9, 2017

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