Are Market Makers Pricing in Too Much Movement in URBN?

Urban Outfitters, Inc. (URBN) is an apparel and accessories company operating under multiple brands both in brick and mortar stores and online channels. The company’s stock is currently trading around $30.90 in a 52 week range of $29.11-$40.67. The stock has been relatively weak this year with shares falling by 16.77% year to date. The company is set to report earnings Monday afternoon.

The stock has sold off on earnings day 5 of the past 8 quarters with an average move of 4.7%. The options market is currently implying a move of about $1.90 by November expiration. This implies a 6.1% move on earnings, higher than the historical average. Although URBN has a bearish earnings record we have seen other names in the space report solid quarters and perform well since. With mixed metrics surrounding URBN and a larger than normal move being implied I will be looking to get short premium and fade the movement in URBN.

Trade: Selling the URBN Nov 29-31-33 Iron Butterfly for $1.35
Risk: $65 per 1 lot
Reward: $135 per 1 lot
Breakeven: $29.65 and $32.35