FL Analysis

Foot Locker Inc. (FL)

Update 6/9/2017: FL gapped $10 to the downside after earnings were published and fell a bit ore than $4 more in the ensuing two weeks before I took the loss.

Shares decliend by 23.2% over 22 days, or a -384% annual rate. The options position produced a -147.6% loss on debit for a -2,448% annual rate.


FL publishes earnings on Friday before the opening bell.

I shall use the series of monthly options that trade for the last time 29 days hence, on June 16.

Implied volatility stands at 33%, which is 2.2 times the VIX, a measure of the volatility of the S&P 500 index.

FL’s IV stands in the 69th percentile of its annual range and the 98th percentile of its most recent broad movement.

The price used for analysis was $70.64.

Premium: $4.80 Expire OTM  
FL-iron fly Strike Odds Delta
Long 80.00 93.0% 8
Break-even 82.30
Short 77.50 48.8% 55
Puts
Short 70.00 51.4% 45
Break-even 64.80
Long 60.00 93.3% 5

The premium is 78% of the width of the position’s wings.

The risk/reward ratio is 1:1.

Decision for My Account

The grid was a bit tricky to work with, given the distribution of the strikes in relation to delta,  but nonetheless I have entered an order on FL as described above. The stock at the time of entry was priced at $70.73.

By Tim Bovee, Portland, Oregon, May 18, 2017

2 thoughts on “FL Analysis

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