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.

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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
Puts
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