BIG Analysis

Big Lots Inc. (BIG)

Update 5/26/2017: BIG rose sharply to the upside after earnings were published and then whipsawed, giving most of the gain back. I exited at 24.9% of maximum potential profit.

From entry the day before to exit, shares produced at net rise of 0.4%, or a +128% annual rate. The options position produced a 33.2% yield on debit for a +12,122% annual rate.


BIG publishes earnings on Friday before the opening bell.

I shall use the series of monthly options that trade for the last time 22 days hence, on June 16.

Implied volatility stands at 43%, which is 4.3 times the VIX, a measure of the volatility of the S&P 500 index.

BIG’s IV stands in the 67th percentile of its annual range and the 98th percentile of its most recent broad movement.

The price used for analysis was $48.22.

Premium: $3.65 Expire OTM  
BIG-iron fly Strike Odds Delta
Long 55.00 92.0% 10
Break-even 51.15
Short 47.50 46.2% 58
Puts
Short 47.50 53.7% 42
Break-even 43.65
Long 40.00 92.0% 6

The premium is 49% of the width of the position’s wings.

The risk/reward ratio is 1.1:1.

Decision for My Account

I have entered an order on BIG as described above. The stock at the time of entry was priced at $48.30.

By Tim Bovee, Portland, Oregon, May 25, 2017

2 thoughts on “BIG Analysis

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