PAY Analysis

VeriFone Systems Inc. (PAY)

Update 6/9/2017: PAY declined sharply after earnings were published and then rose, remaining well below it’s prior close. The price remained within the zone of profitability throughout the movement. I exited during the bounce, at 37.5% of maximum potential profit, above my 25% target.

Shares showed a net decline of 4.4% over the day I held the position, or a -1,617% annual rate. The options position produced a 60.0% yield on debit for a +21,900% annual rate.


PAY publishes earnings on Thursday after the closing bell.

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

Implied volatility stands at 48%, which is 4.7 times the VIX, a measure of the volatility of the S&P 500 index.

PAY’s IV stands in the 62nd percentile of its annual range and the 99th percentile of its most recent broad movement.

The price used for analysis was $18.08.

Premium: $1.52 Expire OTM  
PAY-iron fly Strike Odds Delta
Long 21.00 92.7% 9
Break-even 19.52
Short 18.00 50.6% 54
Puts
Short 18.00 49.5% 46
Break-even 16.52
Long 15.00 89.5% 8

The premium is 51% of the width of the position’s wings.

The risk/reward ratio is 1:1.

Decision for My Account

I have entered an order on PAY as described above. The stock at the time of entry was priced at $1.52.

By Tim Bovee, Portland, Oregon, June 8, 2017

 

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