Marvell Technology Group Ltd. (MRVL)
Update 5/30/2017: MRVL rose sharply after earnings were published, remaining high today despite an intra-day decline. I exited at 42.2% of maximum potential profit.
Shares showed a net rise of 3.2% over five days, or a +235% annual rate. The options position produced a +73.1% yield on debit for a +5,339% annual rate.
MRVL publishes earnings on Thursday after the closing 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 39%, which is 3.9 times the VIX, a measure of the volatility of the S&P 500 index.
MRVL’s IV stands in the 49th percentile of its annual range and the 88th percentile of its most recent broad movement.
The price used for analysis was $16.97.
Premium: | $1.16 | Expire OTM | |
MRVL-iron fly | Strike | Odds | Delta |
Long | 20.00 | 92.5% | 9 |
Break-even | 18.16 | ||
Short | 17.00 | 53.6% | 51 |
Puts | |||
Short | 17.00 | 46.4% | 49 |
Break-even | 15.66 | ||
Long | 14.50 | 85.9% | 12 |
The premium is 42% of the width of the position’s wings.
The risk/reward ratio is 1.2:1.
Decision for My Account
I have entered an order on MRVL as described above. I changed to the JUN series of options expiring June 16, when the earlier expiring weeklys proved to be too illiquid to support a trade. The stock at the time of entry was priced at $16.95.
By Tim Bovee, Portland, Oregon, May 25, 2017
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