URBN Analysis

Urban Outfitters Inc. (URBN)

Update 5/17/2017: URBN fell for five days straight before earnings were published and fell again the day after. I exited at a debit of $1.26, or 40% of maximum potential profit.

Shares declined by -3.0% over one day, or a -1,086% annual rate. The options position produced a 66.7% yield on debit for a +24,333% annual rate.

URBN publishes earnings on Tuesday after the closing bell.

I shall use the series of monthly options that trade for the last time 10 days hence, on May 26.

Implied volatility stands at 56%, which is 5.2 times the VIX, a measure of the volatility of the S&P 500 index.

URBN’s IV stands in the 78th percentile of its annual range and at the peak of its most recent broad movement.

The price used for analysis was $20.48.

Premium: $2.10 Expire OTM  
URBN-iron fly Strike Odds Delta
Long 25.00 93.6% 8
Break-even 24.60
Short 22.50 52.7% 53
Short 22.50 47.6% 47
Break-even 19.10
Long 17.00 88.9% 9

The premium is 53% of the width of the position’s wings.

The risk/reward ratio is 1.1:1.

Decision for My Account

I have entered a position on URBN as described above. The stock at the time of entry was priced at $20.51.

By Tim Bovee, Portland, Oregon, May 16, 2017

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