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.

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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