Gap Inc. (GPS)
Update 5/19/2017: GPS had declined for six trading days prior to the earnings announcement, and declined again the day after earnings were published.
In the one day I was in the position, shares fell by 3.8%, or a -1,386% annual rate. The options position produced a 28.1% yield on debit for a +13,919% annual rate.
GPS publishes earnings on Thursday after the closing bell.
I shall use the series of monthly options that trade for the last time eight days hence, on May 26.
Implied volatility stands at 45%, which is 2.9 times the VIX, a measure of the volatility of the S&P 500 index.
GPS’s IV stands in the 41st percentile of its annual range and the 89th percentile of its most recent broad movement.
The price used for analysis was $23.24.
The premium is 47% of the width of the position’s wings.
The risk/reward ratio is 0.8:1.
Decision for My Account
I have entered an order on GPS as described above. The stock at the time of entry was priced at $23.18
By Tim Bovee, Portland, Oregon, May 18, 2017