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INVN max pain +5

17:13 20-Aug-15


I've been seeing a lot of hand wringing lately over the price of InvenSense shares.  While I think the sell-off is overdone, but I'm also not shocked.  I've been saying that INVN would be left vulnerable to broader market whims and that's exactly what we're seeing.  That has left the stock vulnerable to a max-pain scenario, as shown in the table below:

Open Calls
 INVN Strike Price
 Open Puts
1 9.00 0
62 9.50 146
176 10.00 257
117 10.50 551
287 11.00 132
29 11.50 69
54 12.00 549
16 12.50 505
380 13.00 1,130
529 13.50 538
920 14.00 372
687 14.50 0
850 15.00 231
42 15.50 99
302 16.00 237
0 16.50 0
442 17.00 15
0 17.50 0
112 18.00 2
0 18.50 0
15 19.00 85

As you can see, max-pain is acheived below $9.50 per share.  In my experience, such situations are typically temporary, and the rebate rate, which seems to have bottomed at 1% and begun moving back up, may offer initial confirmation.  However trading on such assumptions leaves one open to further manipulation.  I prefer fundamental developments and analysis.

The next phones from Apple may be a relief point then as well, followed by the InvenSense Developer conference on November 17th & 18th.  Regular readers will recall that this conference was delayed so that InvenSense could introduce some new tools.  I look forward to seeing what the company has in store.  I also note that InvenSense has been developing patents at a progressively greater rate since the acquisitions it made last year.

InvenSense may still have to wait until next year to prove execution on the plans it has been developing.  Nonetheless, the stock is now officially cheap with a hybrid PE of just 8.7, after subtracting out the $4 per share in cash that has already been amassed by consistent year over year growth.  The market may recover if the Fed doesn't move rates next month, or perhaps even if it does, depending on the language.  The market mostly hates uncertainty.  After being burned last year, InvenSense investors do too. This sale is unlikely to last, though.