FOSL Analysis

Fossil Group Inc. (FOSL)

Update 8/14/2017: FOSL shares fell about $4.50 after reporting earnings at a $0.61 loss per share, below the Street expectation of a $0.39 loss. Shares traded sideways for two sessions, and the fell an additional 50 cents, then traded sideways for an additional two sessions. I exited with shares at $8.31.

Shares declined by 32.5% over my six-day holding period, or a -1,977% annual rate. The options position produced a -49.9% loss on debit for a -3,033% annual rate.

The Zacks Investment Research earnings surprise predictor showed a 200% negative earnings surprise coming. Had I used the ESP as a screen, I would have passed on the trade.

Had I exited the first session after earnings were published, the cost would have been a $3.23 debit, or $0.32 below the $3.55 I paid to get out. It was the decline in the third session after publication that made holding a losing tactic.

FOSL publishes earnings on Wednesday after the closing bell.

I shall use options that trade for the last time 10 days hence, on Aug. 18.

Implied volatility stands at 99%, which is 9.9 times the VIX, a measure of the volatility of the S&P 500 index.

FOSL’s IV stands at the peak of both its annual range and its most recent broad movement.

The price used for analysis was $12.30.

Premium: $1.75 Expire OTM  
FOSL-iron fly ` Odds Delta
Long 15.00 83.9% 22
Break-even 14.25 ~75.4% ~32
Short 12.50 57.0% 52
Short 12.50 42.7% 48
Break-even 10.75 ~63.6% ~28
Long 9.00 84.5% 10

The premium is 58% 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 FOSL as described above. The stock at the time of entry was priced at $12.31.

By Tim Bovee, Portland, Oregon, Aug. 8, 2017


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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