CTRP Analysis

Ctrip.com International Ltd. (CTRP)

Update 8/31/2017: CTRP’s stock price fell $3.70 after earnings were published, after earnings came it at double the consensus forecast.  I exited for a loss.

Shares declined by 7.0% over one day, or a -2,558% annual rate. The options position produced a -28.85 loss for a -10,442% annual rate.

The movement after publication was nearly double the average and central tendency of movements following the last four earnings announcements, and just a bit below the maximum.

The Street estimate for earnings was $0.08 per share, and the actual eps was $0.17. Zacks Investment Research going into earnings gave CTRP an earnings surprise predictor score of 11.11, signifying a major earnings surprise to the upside, which indeed is what happened. The beta was 1.71.

The post-earnings movement, at $3.70, far beyond the expected movement $2.51, placing it in a category that in theory covers the response to only 15% of earnings announcements.


CTRP publishes earnings on Wednesday after the closing bell.

I shall use options that trade for the last time nine days hence, on Sept. 8.

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

CTRP’s IV stands in the 75th percentile of its annual range and the 86th percentile of its most recent broad movement.

The price used for analysis was $52.68.

Premium: $2.77 Expire OTM  
CTRP-iron fly Strike Odds Delta
Long 58.50 91.7% 10
Break-even 55.77 ~76.0% ~27
Short 53.00 53.5% 50
Puts
Short 53.00 46.5% 50
Break-even 50.27 ~70.0% ~27
Long 47.50 90.0% 9

The premium is 50.4% of the width of the position’s wings.

The risk/reward ratio is 1:1.

The zone of profit in the proposed trade covers a $2.75 move either way. The biggest immediate move after each of the past four earnings announcements was $4.02, and the average was $2.08. After eliminating the maximum and minimum post-earnings movements, the central tendency is $1.80.

The expected move covering 85% of occurrences is $2.51, within the $2.75 break-even width.

The bid/ask spread is 10%.

Decision for My Account

I have entered an order on CTRP as described above. The stock at the time of entry was priced at $52.80.

By Tim Bovee, Portland, Oregon, Aug. 30, 2017

Disclaimer

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.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

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