בס״ד

613% Winner on Your Festival of Food! (MKC,WPM/GLD)

Posted on October 1, 2020

A very happy Harvest Festival to all you good Jews and Noahides.

We’re going to get to our weekly offering in a moment, but before we do, please close down the following very fine and profitable trade that we opened but a week back.

It was our WPM/GLD pairing (third time this year!), offered to you in a missive dubbed Cast Your Burden on Hashem; He’ll Sustain You.

And that He did.

The communiqué urged you to sell the GLD October 2nd 178.50 straddle for $4.54 and purchase the WPM October 16th 50 straddle for the very same $4.54.  Zero Premium was the result.

And now?

The WPM straddle is worth $3.42 (1.22/2.20) and the GLD $2.35 (0.48/1.87).

Sell the first, buy back the second, and you walk with $1.07 on nothing spent.

In a single knockwurst week!

Adjusted for minimal commissions gives you a hale 613% return.

[That’s a full deck of mitzvahs, baby!]

Today’s trade is brought to you by McCormick & Co. (NYSE:MKC), manufacturers of “spices, seasoning mixes, condiments, and other flavorful products to the food industry.”

Flavorful Products…

According to the company’s literature, that includes offering “coating systems, and compound flavors” to multinational food manufacturers.

Aye, friend…

As far as we’re concerned, poison is poison, and it matters little which way it’s promoted (or ingested).

What we’re trying to determine today is investor enthusiasm (or lack thereof) for MKC stock.

And this is what we see.

Here is the weekly chart of MKC, and it shows the following –

  • A 90% rise in just five months that – according to weekly RSI and MACD indicators – has been losing momentum for better than 30 days (in green).
  • Simple Fibonacci retracement levels that bring the stock to either the 170 or 140 range.

The daily chart, too, shows a stock that is struggling to keep its head above water.

Most notably –

We see…

  1. RSI submerged bearish (in green) and unable to surface, and
  2. MACD sub-waterline for a full week and wanting to go lower.
  3. All of this occurs after three fan-lines higher have been completed (in red), and
  4. Price has broken below its short term moving average.
  5. Support emerges between 165 and 175 (also a potential Fibonacci bottom).

In short, it’s very likely we’ll see a decline of at least 10% before the sell-off is complete.

And it’s for all the foregoing that we’re recommending the SPECULATIVE purchase of a PUT spread financed by the sale of a CALL spread.

Like this –

A Jew and His Gold recommends you consider selling the MKC October 16th 185 CALL for $9.10 and buying the MKC October 16th 190 CALL for $6.50 (credit $2.60), then buy the MKC October 16th 190 PUT for $3.10 and sell the MKC October 16th 185 PUT for $1.05 (debit $2.05).  Total credit on the trade is $0.55.

Rationale: we’re expecting a sharp decline over the next two weeks in MKC stock, and we want to profit from it without great expense.

The trade is therefore structured in a manner that generates a credit to start, a maximum loss profile of $4.45 and a maximum gain of $5.00.

Should we see a quick move lower, we may opt to close for whatever’s on offer.

Conversely, should we approach expiry without the expected decline in hand, we may take corrective action should time and opportunities permit.

Many happy returns.

Matt McAbby

 

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