NTAP Analysis

NetApp Inc. (NTAP)

Update 8/21/2017: NTAP’S earnings beat the Street estimate somewhat, coming in at $0.62 as compared to $0.58. In keeping with the perverseness of the markets, the price fell $2 on the second trading day after the announcement, and continued to fall for three subsequent days. I exited for a loss with options expiration less than a week away.

Shares showed a net decline of 7.7% over my five-day holding period, or a -562% annual rate. The options position produced a -33.7% loss for a -2,461% annual rate.

NTAP publishes earnings on Wednesday after the closing bell.

I shall use options that trade for the last time nine days hence, on Aug. 25.

Implied volatility stands at 35%, which is 3.1 times the VIX, a measure of the volatility of the S&P 500 index.

NTAP’s IV stands in the 55th percentile of its annual range and the 75th percentile of its most recent broad movement.

The price used for analysis was $42.18.

Premium: $2.36 Expire OTM  
NTAP-iron fly Strike Odds Delta
Long 47.50 89.3% 13
Break-even 44.86 ~80.0% ~22
Short 42.50 55.6% 48
Short 42.50 44.5% 52
Break-even 39.86 ~71.0% ~26
Long 37.50 87.8% 10

The premium is 47.2% of the width of the position’s wings.

The risk/reward ratio is 1.1:1.

The expected move is $2.23, within the $2.50 break-even width.

Decision for My Account

I have entered an order on NTAP as described above. The stock at the time of entry was priced at $42.18.

By Tim Bovee, Portland, Oregon, Aug. 16, 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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