Posted on October 7, 2022
Before we get to the day’s trade a quick word on our editorial schedule for the coming weeks.
To begin, next Monday, October 10th, is the opening of the holy week of Sukkot and will therefore necessitate a pilgrimage to the Holy City of Yerushalayim. There will therefore be no letter.
We’ll return next Thursday, October 13th, during the intermediate days of the holiday with a postponed version A Jew and His Money.
The following Monday, October 17th marks the holy convocation of Shemini Atzeret (Simchat Torah), a holiday necessitating repeated calls to the Holy Torah of G-d and a bounty of feasting and rejoicing. Again, there will be no letter on that day.
We’ll return that Thursday, October 20th with our regularly scheduled A Jew and His Gold.
And from there, bli neder, all will return to normal until the coming of our righteous redeemer, the holy anointed one, Mashiach ben David, may he arrive speedily in our days.
On With It.
Today’s trade is a Pulp and Paper inferno that offers a wickedly hot 4900% return in almost no time at all.
The underlying is Memphis’ International Paper Company (NYSE:IP), global leaders in the packaging business, producing everything from containerboards to saturating kraft to fluff for use in the manufacture of absorbent hygiene products, such as baby diapers, feminine care and adult incontinence marketables.
Fundamentals for the company are perfectly sound, and they look like this –
All told, a reasonable set of numbers.
The company will be announcing earnings on the 27th of October, before the bell, and our trade has taken that important date into consideration
In other news, the company is in the process of buying back half a billion dollars in debt, a development that appears to have stemmed the stock’s decline, as investors are reassured the company is in a better position to weather a tougher business climate.
Now look at the chart –
Technically, we’re looking at –
All of which supports our contention that IP shares are about to rise.
And we’re playing it like this –
A Jew and His Gold recommends you consider selling the IP January 20th 35/32.50 PUT spread* for a credit of $1.25 (3.70/2.55) and buying the IP January 20th 32.50/35 CALL spread** for $1.30 (2.85/1.55). Total debit on the affair is $0.05.
Rationale: for a nickel outlay we open the way for a huge $2.45 haul (4900%).
Max loss is $2.55 (difference between the PUT strikes plus the initial debit).
Breakeven on the trade occurs at $33.80, and with price now at $32.87, that entails a rise of just 2.8%.
Full winnings are achieved on a climb of 6.4%. And in the current whipsaw trading environment, that’s perfectly possible.
We’ve got better than three months to get there, race fans!
May the One, true G-d of Israel help us along the way.
Many happy returns!