Posted on July 6, 2022
There’s a profit avalanche a’rumbling…
And that’s why we’re coming at you early.
Today’s business appears further below, but we’re leading with an open trade that’s fried and friendly and ready to eat.
So cue the energy sector –
It’s our COP trade, whose details can be found HERE.
In brief, we’re holding a debit of $5.26, a short COP July 15th 115 CALL and a long COP July 15th 92.50 PUT.
The CALL can be left to wither. With COP now trading at $84.64, we see little chance of a move higher of that magnitude (to 115) in the next nine days.
On the other hand, the PUT trades for $8.45. Sell it and you exit with a stout $3.19 NET (on an initial outlay of just $0.26).
And that’s 1226%.
And now we push the cart to the checkout.
Grocery Outlet (NASDAQ:GO) touts itself as an “extreme value retailer of quality, name-brand consumables…”
And there’s no question its stock has destroyed its industry peers in the grocery aisle this year due to a unique sourcing and distribution strategy that kept her (mostly) clear of supply chain issues.
That said, all good things eventually go belly-up dead.
And we feel the time for GO to begin that process is about now.
But mostly because an investment in GO shares now represents an extreme DEARTH of value.
Take a look at her fundamentals –
Now the chart –
This is six months’ worth of trade in GO stock, and it shows –
Our trade is looking to capitalize on all the foregoing.
Like this –
A Jew and His Gold recommends you consider selling the GO August 40/45 CALL spread* for a credit of $2.45 (4.80/2.35) and buying two (2) GO August 40/35 PUT spreads** for $1.35 (1.95/0.60) each. Total debit on the trade is $0.25.
Rationale: the trade affords a maximum gain of $9.75 (twice the difference between the PUT strikes less the initial debit).
Max loss is $5.25. (difference between the CALL strikes plus the initial debit).
We’re of the opinion that because GO is a latecomer to the broad market selloff, her initial decline will be significant – a game of catch-up, as it were. And it could well come soon.
If we’re a tad early initiating… patience… patience.
The Lord, G-d of Israel will prove Himself, here and everywhere else His beloved worshippers stand to glorify His great and mighty name.
With kind regards,
Hugh L. O’Haynew