AMBA Analysis

Ambarella Inc. (AMBA)

Update 6/9/2017; AMBA gapped to the downside after earnings were published and declined only slightly more over the next two days, when I exited for a loss.

Shares declined by 12.5% over the three days, or a -1,523% annual rate. Tye options position produced a 35.4% loss on debit for a -4,306% annual rate.

AMBA publishes earnings on Tuesday after the closing bell.

I shall use options that trade for the last time 10 days hence, on June 16.

Implied volatility stands at 51%, which is 4.9 times the VIX, a measure of the volatility of the S&P 500 index.

AMBA’s IV stands in the 65th percentile of its annual range and the 96th percentile of its most recent broad movement.

The price used for analysis was $60.01.

Premium: $4.71 Expire OTM  
AMBA-iron fly Strike Odds Delta
Long 70.00 92.0% 10
Break-even 64.71
Short 60.00 51.4% 53
Short 60.00 48.6% 47
Break-even 54.71
Long 50.00 90.1% 8

The premium is 47% 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 AMBA as described above. The stock at the time of entry was priced at $60.03.

By Tim Bovee, Portland, Oregon, June 6, 2017


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