YELP Analysis

Yelp Inc. (YELP)

Update 5/20/2017: YELP gapped sharply to the downside after earnings were published, and the short puts were assigned on May 10. I exited the resulting shares the next day, along with  the long puts and the short calls, leaving only nearly worthless long calls in the position. They expired without value on May 20.

Shares showed a net decline of 18.6% over 11 days, or a -619% annual rate. The options and shares from the assignment produced a -4.4% los son debit for a -146% annual rate.

YELP publishes earnings on Tuesday after the closing 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 70%, which is seven times the VIX, a measure of the volatility of the S&P 500 index.

YELP’s IV stands in the 87th percentile of its annual range and the peak of its most recent broad movement.

The price used for analysis was $34.40.

Premium: $4.45 Expire OTM  
YELP-iron fly Strike Odds Delta
Long 43.00 93.1% 9
Break-even 38.95
Short 34.50 54.7% 53
Short 34.50 45.1% 47
Break-even 30.45
Long 26.00 86.4% 9

The premium is 52% 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 YELP as described above. The stock at the time of entry was priced at $34.23.

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

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