MRVL Analysis

Marvell Technology Group Ltd. (MRVL)

MRVL publishes earnings on Tuesday after the closing bell.

I shall use options that trade for the last time 10 days hence, on Dec. 8.

Implied volatility stands at 38%, which is 3.8 times the VIX, a measure of the volatility of the S&P 500 index.

MRVL’s IV stands in the 71st percentile of its annual range and the 81st percentile of its most recent broad movement.

The price used for analysis was $23.39.

As the metrics indicate no clear direction, i shall use the iron fly structure, which profits within a range in either direction.

Premium: $1.34 Expire OTM
MRVL-iron fly Strike Odds Delta
Long 26.00 90.5% 11
Break-even 24.84
Short 23.50 53.9 49
Short 23.50 46.2% 51
Break-even 22.34
Long 21.00 88.4% 10

The premium is 53.6% of the width of the position’s wings.

The risk/reward ratio is 0.9:1.

The zone of profit in the proposed trade covers a $1.25 move either way. The biggest immediate move after each of the past four earnings announcements was $1.44, and the average was $1.23. After eliminating the maximum and minimum post-earnings movements, the central tendency is $1.32.

The expected move covering 85% of occurrences is $1.33, beyond the profit zone.

The bid/ask spread is 13.2%.

Decision for My Account

MRVL has problems of coverage, and also an overly wide bid/ask spread. The expected move with 85% confidence, at $1.33, is greater than the profit zone and also the average post-earns move and central tendency of the last four quarters. I like the risk/reward ratio, but that’s insufficient to overcome narrowness of the coverage.

By Tim Bovee, Portland, Oregon, November 28, 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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