GME Analysis

GameStop Corp. (GME)

Update 4/10/2017: GME gapped sharply to the downside after earnings were published and never returned to profitability. I exited for a loss 12 days before the position expired.

Shares declined b6 8.4% over 18 days, or a -170% annual rate. The options position produced a -9.1% loss on debit for a -183% annual rate.


 

GME publishes earnings on Thursday after the closing bell.

I shall use the APR series of options, which trades for the last time 29 days hence, on April 21.

Implied volatility stands at 43%, which is 3.4 times the VIX, a measure of the volatility of the S&P 500 index.

GME’s IV stands in the 62nd percentile of its annual range and the 60th percentile of its most recent broad movement.

The price used for analysis was $24.11.

Premium: $1.91 Expire OTM  
GME – iron fly Strike Odds Delta
Calls
Long 27.00 86.8% 16
Break-even 25.91
Short 24.00 53.3% 52
Puts
Short 24.00 46.9% 48
Break-even 22.09
Long 20.00 89.5% 9

The premium is 55% of the width of the position’s wings.

The risk/reward ratio is 0.9:1.

Decision for My Account

I have entered a position on GME as described above. The stock at the time of entry was priced at $24.05.

By Tim Bovee, Portland, Oregon, March 23, 2017

4 thoughts on “GME Analysis

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