STNE Analysis

StoneCo Ltd. (STNE)

Update 4/29/2019I exited STNE today for a loss, paying a debit of $3.75, nearly triple the entry credit. The fintech company was tick-tocking along within extraordinarily wide profit zone when a rival made an announcement that was seen as a threat to STNE corporate performance. Shares at the April 18 open gapped down by 14%, from $34.74 to $29.75. The stock price never recovered. See today’s post on DIS for a discussion of mitigation. Altogether, shares declined by $12.86 and the options position by $2.44.

Shares declined by 31.9% over 40 days, or a -291% annual rate. The options position produced a 65.1% loss for a -594% annual rate.

STNE is another of the companies that I entered while working out my current strategy, so it wasn’t fully documented on March 20, when I entered a short iron condor spread on the company, using options that traded for the last time 58 days later, on May 17. The premium is a $1.31 credit and the stock at the time of entry was priced at $40.36.

The profit zone for this position is between $51.31 on the upside and $29.31 on the downside.

The implied volatility rank (IVR) stands at 70.

Premium: $1.31 Expire OTM
STNE-iron condor Strike Odds Delta
Long 55.00 92.0% 12
Break-even 51.31 88.0% 17
Short 50.00 84.0% 22
Short 33.00 74.0% 19
Break-even 29.31 80.5% 13.5
Long 28.00 87.0% 8

The premium is 26.2% of the width of the position’s wings.

The risk/reward ratio is 2.8:1.

By Tim Bovee, Portland, Oregon, April 29, 2019


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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