Paylocity Holding Corporation [PCTY]
As of 2026-07-28 close · spot $138.68 · analysis only, no position verdict
| Measure | Value |
|---|---|
| Market cap | $7,425m |
| Enterprise value | $7,207m |
| Recent daily volume (Jun–Jul 2026) | 0.40m – 1.83m shares |
| Notional at $138.68 | $55m – $254m per day |
| Realised vol, 252-day | 40.0% |
| Realised vol, 63-day | 47.5% |
Ample for any size this book would take. A $10m position is roughly 4–18% of one day's notional and exits in a session. PASS.
criteria.md is explicit: "Any proposed options structure requires the actual chain pulled first — open interest and quoted size for the specific strikes and expiry… A vehicle that cannot be filled is not a vehicle." The chain was pulled from Alpaca on 2026-07-28. Every listed expiry, every strike:
| Expiry | Contracts listed | Total open interest, calls + puts, all strikes |
|---|---|---|
| 2026-08-21 | 66 | 909 |
| 2026-09-18 | 48 | 26 |
| 2026-11-20 | 58 | 483 |
| 2027-02-19 | 56 | 51 |
| Total | 228 | 1,469 contracts |
1,469 contracts is ~147,000 shares of notional — roughly $20m across the entire listed option market in this name, and that is open interest, not available liquidity. The single largest open interest on any strike is 105 contracts (Aug-2026 $125 call).
The quoted spreads make it worse:
| Contract | Bid | Ask | Mid | Spread as % of mid | OI |
|---|---|---|---|---|---|
| Aug-26 $145 call | 6.93 | 9.65 | 8.29 | 32.8% | 14 |
| Aug-26 $150 call | 4.58 | 7.26 | 5.92 | 45.3% | 21 |
| Nov-26 $150 call | 13.13 | 16.66 | 14.90 | 23.7% | 10 |
| Nov-26 $165 call | 9.45 | 11.88 | 10.67 | 22.8% | 92 |
| Feb-27 $110 call | 42.68 | 45.97 | 44.33 | 7.4% | 1 |
A defined-risk call spread at any of these strikes would cross 20–45% of mid on each leg, in a name whose 12-month target is +17.6%. The bid/ask alone consumes more than the expected return.
Liquidity Criteria: PASS on equity, FAIL on any options vehicle. This mirrors the HCA precedent recorded in criteria.md (maximum open interest across an entire March-2027 chain: 18 contracts). It is not a marginal call — it is an order of magnitude.
Implied volatility, for completeness only. At-the-money IV is ~50–53% for August (spanning the 4 August earnings print) and ~50% for November, against 40% realised over 252 days and 47.5% over 63 days. Options are priced above realised vol into a binary event, which would ordinarily argue for selling premium rather than buying it — but the same open-interest problem prevents that too.
The memo issues no verdict. What follows is the construction a book would use if it decided to act, so the decision can be costed.
Vehicle: common stock only. No options structure in this name passes the Liquidity Criteria.
The single dominant timing fact. Q4 FY26 results and the first FY27 guidance are on Tuesday 4 August 2026 at 4:00pm CT — six sessions away, confirmed by the company's own release of 14 July 2026. The stock enters that print having risen:
and trading at the 100th percentile of its post-February-2026 EV/EBIT range. There is no filing that explains the move; secondary press attributes it to a sell-side top-idea note and a sector-wide HCM rally, uncorroborated.
Precedent for the gap. PCTY has printed −7.24% (6 Feb 2026), −6.13% (3 Feb 2026), −7.07% (9 Apr 2026) and +8.52% (26 Feb 2026) single sessions this year. August option IV of ~53% implies a ~±8–9% move on the print.
Therefore the construction is: do not initiate into 4 August. A book that wants the name should either (a) take a starter position of no more than one third of target size now and complete after the guidance is known, or (b) wait entirely. The asymmetry is unfavourable — the market has already re-rated the stock 39% into an event that will, on the Q4 guidance trajectory, most likely deliver an FY27 total-revenue guide with a single-digit handle.
Sizing. Inverse-volatility, per the framework's interim control. At 40% realised vol (252d) PCTY is roughly 3.1× SPY's volatility, so it carries roughly one third of a volatility-neutral unit. The 63-day vol of 47.5% argues for less still until the event passes.
Entry. Not defined here — the entry decision belongs to the book, and the memo's role is to say what the entry is buying. At $138.68 the buyer is paying for a required 12.55% five-year revenue CAGR (float −100bp, zero multiple compression) against 11.31% demonstrated.
Invalidation, stated as falsifiable conditions rather than a stop price:
Thesis confirmation, equally falsifiable:
Short Mechanism Criteria: FAIL — there is no short mechanism here. The condition requires decelerating growth and exhausted margin runway. Growth is decelerating (twelve quarters), but the margin runway is visibly not exhausted: the ex-float operating margin expanded from 12.27% to 15.33% over the trailing twelve months, +3.1pp. A business still harvesting 3pp a year of operating leverage, with 22% ROIC, net cash and a 3.0×-of-SBC buyback, is not a short at 19.6x EV/EBIT and a −54.6% drawdown from its 2021 high.
Borrow and days-to-cover are not scored — criteria.md places them outside the Liquidity Criteria on a long-only book.