PANW Analysis

Palo Alto Networks Inc. (PANW)

Update 6/2/2017: PANW gapped sharply higher after earnings were published, putting it beyond reach of profitability in the week before options expiration. I took the loss.

Shares rose by 16.6% over two days, or a +3,029% annual rate. Tye options position produced a -40.3% loss on debit for a -7,354% annual rate.

PANW publishes earnings on Wednesday after the closing bell.

I shall use options that trade for the last time nine days hence, on June 9.

Implied volatility stands at 48%, which is 4.3 times the VIX, a measure of the volatility of the S&P 500 index.

PANW’s IV stands in the 84th percentile of its annual range and the 78th percentile of its most recent broad movement.

The price used for analysis was $118.91.

Premium: $10.03 Expire OTM  
PANW-iron fly Strike Odds Delta
Long 139.00 91.1% 11
Break-even 130.03
Short 120.00 55.4% 50
Short 120.00 44.5% 51
Break-even 111.03
Long 101.00 90.0% 8

The premium is 53% of the width of the position’s wings.

The risk/reward ratio is 0.9:1.

Decision for My Account

I have entered an order on PANW as described above. The stock at the time of entry was priced at $118.7.

By Tim Bovee, Portland, Oregon, May 31, 2017


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