PANW Options Analysis

PANW Options Analysis

(1) Fundamental Analysis:

• Industry rotation in the stock market on Friday. Funds flowed out of overbought industries (technology, communication services, consumer discretionary/cyclical) into oversold industries (consumer defensive, utilities, energy, finance, medical care). The opposite occurred last week. Funds flowed out of 'medical care, finance, consumer defensive' into industries such as 'technology, consumer discretionary, communication'. Industry rotation happens alternately.

• Comparing the quarterly performance with the First Trust Nasdaq Artificial Intelligence and Robotics ETF (Nasdaq: ROBT), PANW rose +2.18%, while ROBT fell -2.71%, demonstrating the resilience of the artificial intelligence industry in correcting the market.

• Analyst Ratings: Strong Buy, 76.92% of analysts give a buy rating.

• Intrinsic value: $274.67, current price $293.40 (as of May 1, 2024, slightly above intrinsic value)

(2) Technology:

• The daily chart is above the 10/20 EMA, showing signs of the "Base and Breakout" pattern breaking for the first time but facing rejection, hence requiring further news catalysts and trading volume to drive strength.

• The daily chart is inconsistent with the weekly chart (because the VWAP on the weekly chart is above the price while the daily chart is below), indicating significant rejection at the 304 key level.

• Breaking the downtrend line during the consolidation phase

Unusual Options Chain:

Recent Trends:

In the latest market close, Palo Alto Networks $Palo Alto Networks (PANW.US)$ reached $293.51, up by +0.72% from the previous day. The stock outperformed the S&P 500 daily growth rate of 0.32%. At the same time, the Dow Jones Industrial Average increased by 0.38%, the technology-heavy Nasdaq index increased by 0.35%. Prior to today, the security software manufacturer's stock has risen by 2.57% in the past month, outperforming the 1.9% decline in the computer and technology sector and the 2% decline in the S&P 500. Investors are eagerly anticipating Palo Alto Networks upcoming earnings report. The company is expected to report earnings per share of $1.26, a 14.55% increase from the same period last year. Additionally, our latest consensus estimate predicts revenue of $19.7 billion, a 14.3% increase from the same period last year. For the full year, Zacks consensus predicts EPS of $5.49 and revenue of $8 billion, representing a +23.65% and +16.07% growth respectively compared to the same period last year. Investors may also notice recent changes in analyst ratings for Palo Alto Networks. Recent revisions often reflect the latest short-term business trends. Therefore, the upward revisions in forecasts indicate analysts' optimism towards the company's business operations and its profitability.

Options chain:

IVRank: 92.1

Provide the best IV options chain with higher premiums for option selling: IVx 60.5%, 24DTE and 31DTE are 58.2% respectively.

For the 'Neutral - Call' biased options trading strategy for $PANW, based on different capital needs from small to large:

- Buy at fair value, or when the price falls below $275, or if you already hold the stock, consider adding a spare call option in two cases:a. Call option S300C/B310C trading summary: i. Opening credit: $3.65 per contract ii. Buying power: $660.85 iii. Credit premium (%): 55.23% (over 20% is a good safety margin) iv. Alert breakeven point: $302.95 b. If the options spread realizes within the expiration, roll over to the next expiration date, add a 'buy call option' to hedge losses, or follow the 'maximum risk per trade' trading plan to bear losses c. If the options spread remains unchanged, collect premium at 40-50% profit and continue to adjust upwards (if holding for less than 14DTE) if the stock price rises

- Credit spread: Spread high IV premiums through call spider to obtain premium, sacrificing higher buying power a. Call spider spread B230P/S250P trading summary: i. Opening credit: $2.50 per contract ii. Buying power: $1809.29 iii. Credit premium (%): 13.81% (below 20%, but Δ is 8, can balance safety margin in terms of success probability) iv. Alert breakeven point: $302.95 b. If the options spread realizes within the expiration, roll over to the next expiration date, change it to a 'butterfly spread' to hedge losses, or follow the 'maximum risk per trade' trading plan to bear losses c. If the options spread remains unchanged, collect premium at 40-50% profit and continue to adjust upwards (if holding for less than 14DTE) if the stock price rises

- Debt spread: Engage in butterfly spread trading towards financial report release a. Call spider spread B230P/S250P trading summary: i. Opening debt: $36.50 per contract ii. Buying power: $3766.28 iii. Alert breakeven point: $242/318 iv. If the stock price is not below/above the breakeven level, reevaluate the trade or bear the loss c. If the stock price moves in one direction and IV increases toward the financial report release, profit.