Palo Alto Networks Inc. (PANW)
Update 9/1/2017: My passing on PANW proved to be right decision. The price opened up $12.12 after earnings were published. The opening price, $144.81, was below the upper break-even boundary, but the price rose above it in the second five-minute period after the opening bell and continued to rise. At no point did the position reach my exit point, which is 25% of maximum potential profit.
So, taking the opening price of the second 5-minute period, $143.80, as my theoretical exit, here are the stats:
At exit the price was up $10.55 above the price at analysis, slightly greater than the expected movement. The post-earnings move was much narrower than PANW’s has been in the past, at a ratio of 0.5 of both the average and central tendency after that last four announcements, and 0.2 of the maximum.
Earnings exceed the consensus estimate of $0.81 by 11 cents, coming in at $0.92. Zacks earnings surprise predictor had suggested a very slight chance of a negative earnings surprise, with a -0.06 score. That proved not to be the case.
All in all, I think the figures suggested that I made the right decision in not taking the trade. The beta was my primary reason for making that decision, and I shall continue to use that indicator as a guide, seeking out low beta high implied volatility trades.
PANW publishes earnings on Thursday after the closing bell.
I shall use options that trade for the last time eight days hence, on Sept. 8.
Implied volatility stands at 48%, which is 4.5 times the VIX, a measure of the volatility of the S&P 500 index.
PANW’s IV stands in the 84th percentile of both its annual range and its most recent broad movement.