Posted on January 26, 2022
We’re coming at you early this week because a wintry whirlwind is set to descend on the Holy Land, knocking out power and, we hope, not a few nudnicks along the way.
Anyway, Flowers Foods (NYSE:FLO) is our piñata today – Thomasville, Georgia’s thieving bakers of breads, buns, rolls, snack cakes, and tortillas.
The trade is a good one, and lets us participate in FLO’s coming precipitous decline.
But before we get there, we’ve got FOUR lunar-sized profits to pocket.
To begin, our AMD trade, whose details can be found HERE, has us holding a $9.88 credit and one short AMD February 18th 150 CALL.
We also set a STOP buy order for one lot of AMD at $150 through February 18th.
That we’re now cancelling.
As for the CALL, it can be bought for $0.62, and we’re recommending you execute that purchase with all due speed.
That will leave us with $9.26 NET on just $3.65 spent.
And that’s 153%.
Or 926 US dollars!
Whichever you prefer…
Next up is our AVY trade whose details can be accessed HERE.
Basically, we’re in possession of the AVY April 14th 210 synthetic short and a debit of $10.10.
And what do we do…?
Close the synthetic short by buying back the CALL for $6.80 and selling the PUT for $18.20.
That gives us $11.40 total, or NET $1.30 on $6.10 spent.
And that’s a modest 21.3% win.
Third closure on the day is our SCI wager, whose details can be found HERE.
We’re now holding the SCI March 18th 65 synthetic short and a debit of $1.95.
The synthetic short can be closed for $5.35 gross (1.25/6.60), leaving us with exactly $3.40 on nothing laid out!
Adjusted for minimal commissions gives us a total take of 2167%.
And that’s plain butter.
Finally, the particulars of our WSO trade can be searched HERE.
To keep it brief, we’re short the WSO February 18th 300 CALL and long the WSO February 18th 290 PUT, and are holding a debit of $3.65.
We’re shuttin’ her down.
Buy back the CALL for $5.00 and sell the PUT for $14.50, and you step out with $9.50 gross.
That’s $5.85 NET and a profit of 144%.
And now we Flowerize you.
Commodity cost inflation is what the company is currently battling. It has raised prices, and that’s helped somewhat, though what will be in coming quarters is unknown.
Inputs continue to rise, and transport costs, too. The need to expand its marketing budget was also not anticipated, and that put a drag on overall earnings. Analysts are expecting more of the the same, meaning a very challenging coming quarter for the company.
As the following florid fundamentals attest –
So where does that leave us?
Corsage in hand.
As the chart below will now illustrate –
Technically, we see –
Hence the following risk-defined mother of a short sale:
A Jew and His Money recommends you consider short selling shares of FLO, currently trading at $28.11, and buying a protective FLO April 14th 30 CALL for $0.65 (one per 100 shares sold). Total credit on the trade is $27.46.
Rationale: the downside is wide open to us (max gain is a theoretical $27.46).
Max loss is $2.54 (difference between our initial credit and the protective CALL strike).
Our breakeven on the trade is just 2.3% below current price levels.
After which, we start raking it in.
We’re going to aim for closure when we see price approaching the rising 137 DMA.
Unless she slices through that line like a rose throwing star!
Many happy returns!