880%, 2733%, 1000%! End of Year Profit Orgy! (BBY, AN, SOYB, THO/WLK, TLT/HYG, FSLY)

Scheduling changes:

• The coming Day of Judgment, Rosh HaShana, the Jewish New Year, falls this Saturday and Sunday.  Next week’s A Jew and His Money will therefore arrive to your inbox on Tuesday, September 22^nd.
• The following week, the joyous fast of Yom Kippur falls on Monday, September 28^th. Again, publication of A Jew and His Money will be delayed one day, until Tuesday September 29^th.

We will not be available for communications on any of those dates.

Certainly.

But before we do, we’ve got five to shut down.

So listen up –

On August 24^th we issued a directive entitled AUTOphagous Nation, wherein we recommended you sell an AN September 18^th 55/60 CALL spread for a $2.50 credit and buy AN October 16^th 55 PUT for $2.65.  Total debit on the affair was $0.15.

And today?

The long October PUT sells for $3.10 and the short September 55 CALL trades for $1.45.  Sell the first, buy back the second and leave the long 60 CALL be; there’s currently no bid on it (it could be we’ll sell it before this weekend’s expiry – if we get a bounce).

All told, that’s $1.50 taken on $0.15 laid out – and the chance of more to come.  And that’s 1000% in your knapsack today, Rocky.

Now go skip some rope.

NEXT!

July 8^th saw A Commodity Oddity hit your inbox, a missive that recommended you purchase the SOYB February 19^th 14 CALL for $1.35 and sell the SOYB February 19^th 14 PUT for $0.70.  Total debit on the trade was $0.65.

And today, with lots of time left but SOYB overbought, we’re shutting her down.

We’re selling the CALL for $1.90 and buying back the PUT for $0.30.

That’s a net $0.95 on $0.65 spent.

Call it 146%.

And look for us to reinstate this edamame-lover’s bet after a pullback.

Third Trade Closing

Our THO/WLK pairing of June 18^th (Cage Match to The Finish: Chemical Earth Destroyer Takes on Blond-Haired Norse God!) urged you to buy the WLK January 15^th 55 CALL for $9.50 and sell the WLK January 15^th 65 CALL for $4.30 (debit $5.20).  Then sell the THO January 15^th 165 CALL for $5.80, for a total credit of $0.60.

Today, the short THO CALL trades for $1.35, and the WLK CALL spread is worth $5.00 ($12.20 and $7.20).  Cash out of the lot of them, and you come home with $4.25 on nothing spent.  After adjusting for minimal commissions, your haul is a dastardly 2733%.

And that, fellow Jews, is some spicy, apple and honey New Year’s bliss.

But it doesn’t stop there…

Our FSLY trade, opened on June 28^th and whose details can be found here and here, puts us short the shares (at $79) and short one September 18^th 170 PUT.

With the stock currently at $76.04 and the short PUT now going for $1.70, we’re taking this opportunity to close.

Buy back the shares and the PUT, and you emerge with $1.47 on no initial outlay.

Adjusted for minimal commissions offers you a very satisfying 880% take.

Lastly, on March 2^nd we offered you a TLT/HYG pairing in a communiqué called Playing the First Bounce.  There we recommended you sell the TLT September 18^th 174 CALL for $1.76 and buy the HYG September 18^th 86 CALL for $1.76.  Zero Premium was the result.

And now?

The TLT CALL can be repurchased for a nickel, and because the trade cost nothing to initiate, we’re recommending you buy it back.

If there’s a flight to safety, TLT buyers could flood into the stock, and we’ll face a steeper loss.

Leave the HYG to ride; we may yet profit from a potential spike in junk over the coming week.

And Now…

This week’s trade.

We’ve got the best of all possible bets in Best Buy (NYSE:BBY), a company that shot higher since the Batflu bit and the (apparent) need to stock up on electronics became all consuming.

It’s our feeling the buying has now crested – along with the stock – as it looks altitudinally challenged from our very earthly perspective.

Take a peek at the daily chart –

Technically, we have a potentially dire setup –

1. Along with an overbought RSI read – that persisted for weeks (in green) – and is now sub-waterline,
2. We see MACD poised to confirm with a similar dip in the coming days.
3. Price is now situated at the lower end of a five month trend channel (in red), and because we’re in the midst of broad market weakness, we’re suggesting that line will NOT hold.
4. A large gap to BBY 90 also needs filling, and it’s to that level we’re projecting the next move lower.

Sell?  Me?  Why?

Fundamentally, BBY checks out well –

• It sports a (relatively) reasonable P/E of 17.27,
• Offers a nice 2.05% annual yield,
• Though its P/B is slightly exaggerated at 7.36.

But perhaps most important is the view from the inside…

Corporate insiders in BBY stock have sold – get this – just shy of 60% of their holdings since the coronavirus struck, to the tune of a mind-boggling $180 million.

That’s a fairly straightforward statement, in our view, and it’s the kind of line item we put a lot of faith in.

The trade is (once again) a SPECULATIVE short CALL spread and PUT purchase.

Like this –

A Jew and His Money recommends you sell the BBY October 16^th 105/110 CALL spread for $2.20 ($5.60/$3.40) and buy the BBY October 16^th 100 PUT for $2.47.  Total debit on the trade is $0.27.

Rationale (for all you lawyering types out there):

Whereas – we’re anticipating an imminent decline, and

Whereas – we don’t want to pay for it, and

Whereas – spreads on BBY options are still relatively tight…

We’re paying for the PUT with a CALL spread that puts us at risk precisely $5.27 (difference in strikes plus initial debit), and offers us a theoretically UNLIMITED reward.

With kind regards,

Hugh L. O’Haynew

Follow @HughLOHaynew