P Analysis

Pandora Media Inc. (P)

Update 5/9/2017: P declined sharply immediately after earnings were published and I exited at 31.8% of maximum potential profit.

Shares declined by 2.0% over one day, or a -742% annul rate. The options position produced a 48.7% yield on debit for a +17,033% annual rate.

P publishes earnings on Monday after the closing bell.

I shall use the series of weekly options that trade for the last time 11 days hence, on May 19.

Implied volatility stands at 54%, which is 6.6 times the VIX, a measure of the volatility of the S&P 500 index.

P’s IV stands in the 51st percentile of its annual range and the 66th percentile of its most recent broad movement.

The price used for analysis was $10.55.

Premium: $1.10 Expire OTM  
P-iron fly Strike Odds Delta
Long 13.00 92.6% 10
Break-even 11.60
Short 10.50 51.6% 54
Short 10.50 48.3% 46
Break-even 9.60
Long 8.50 90.5% 7

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

The risk/reward ratio is 1.3:1.

Decision for My Account

I have entered a position on P as described above. The stock at the time of entry was priced at $10.55.

By Tim Bovee, Portland, Oregon, May 8, 2017

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