OAS Analysis

Oasis Petroleum Inc. (OAS)

OAS publishes earnings on Monday after the closing bell.

I shall use the series of monthly options that trade for the last time 32 days hence, on June 16.

Implied volatility stands at 53%, which is 5.2 times the VIX, a measure of the volatility of the S&P 500 index.

OASIS’s IV stands in the 32nd percentile of its annual range and the 70th percentile of its most recent broad movement.

The price used for analysis was $12.02.

Premium: $1.25 Expire OTM  
OAS-iron fly Strike Odds Delta
Long 15.00 93.2% 9
Break-even 13.25
Short 12.00 52.7% 54
Short 12.00 47.3% 46
Break-even 11.25
Long 10.00 83.-% 13

The premium is 50% of the width of the position’s wings.

The risk/reward ratio is 1.4:1.

Decision for My Account

I am passing on OAS. The grid forces me to assume a higher risk/reward ratio than I like when using the iron fly structure. I prefer to keep it at 1.2:1 or better.

By Tim Bovee, Portland, Oregon, May 15, 2017

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