WIX Analysis

Wix.com (WIX)

WIX publishes earnings on Wednesday before the opening bell.

I shall use the series of weekly options that trade for the last time 10 days hence, on May 19.

Implied volatility stands at 89%, which is 9.1 times the VIX, a measure of the volatility of the S&P 500 index.

WIX’s IV stands in the 94th percentile of its annual range and the 93rd percentile of its most recent broad movement.

The price used for analysis was $74.00.

Premium: $8.95 Expire OTM  
WIX-iron fly Strike Odds Delta
Long 100.00 95.4% 7
Break-even 83.95
Short 75.00 58.3% 51
Short 75.00 42.0% 50
Break-even 63.95
Long 55.00 90.7% 6

The premium is 40% of the width of the position’s wings.

The risk/reward ratio is 1.5:1.

Decision for My Account

The risk/reward ratio is greater than I like, and the super-high volatility makes the minimum cost of a spread of the sort I prefer more expensive that I would like if things move against me. I am passing on the WIX trade.

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

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