בס״ד

Closing One for 136%! – and Playing the Human Chattel Trade (KFY,CELH)

Posted on March 8, 2021

Bright and breezy blow the winds of wealth this morning, friends.

It’s time to cash in!

We’re closing one down today for a very solid profit of 136%.

It was our Celsius trade (CELH), opened the 24th of December, whose details can be found here.

To summarize, we’re holding the April 16th 55 synthetic PUT and a credit of $0.80.

And…?

With CELH now trading at $51.87, the short CALL goes for $6.50 and the long PUT sells for $9.10.

Buy back the former, sell off the latter, and you pull in a grand total of $5.90 on $2.50 spent.

And that amounts to a ten week haul of 136%.

We’d call that some fine spring weather, brother.

And now for today’s effort.

We’re venturing the corporate slave trade this morning with a look at recruitment specialists Korn Ferry (NYSE:KFY), an outfit that’s been moving bodies about the globe for money since 1969.

The company’s shares have moved up strongly over the last month on increasing growth expectations, but, alas!, things got a wee carried away, in our opinion.

  • With a P/E of 71.03,
  • A Price to Book of 2.68 (not so crazy),
  • And a Dividend Yield of 0.65%,

We say there’s not much there.

Additionally, we see that

  • Quarter over quarter sales and earnings are NEGATIVE 56.20% and NEGATIVE 67.40%, respectively.

What the…?

What happens quite often after a dismal quarter is much better sales and earnings are forecasted, leading to momentum traders piling on without thinking, and a bubbly stock price the end result.

We weren’t the only ones to see it, either.

Between February 23rd and March 1st, while the stock was cresting at multi-year highs, insiders sold off just shy of 20% of their holdings, for a cool $12 million.

Now look at the chart –

Technically, KFY’s got problems.

  1. First, an overbought RSI read last week on the daily chart (in green) was seconded by another on the weekly (not shown here), a double-whammy CEASE and DESIST order in the world of stock trading.
  2. And that was followed by a MACD rollover.
  3. Both of the above occurred as the stock was breaking above a four month trend channel (in blue),
  4. Setting a multi-year high, and
  5. Cruising way above her long term MAs like a lost falcon in the ethereal celesta.
  6. That ascent left a gap at 51 that needs filling (in purple) and a simple Fibonacci retracement marker at 48 – the ultimate level to which we see KFY declining.

And with that in mind, we offer you the following –

A Jew and His Money recommends you buy the KFY June 18th 80 PUT for $22.00 and sell the KFY June 18th 60 CALL for $3.00.  Total debit on the trade is $19.00.  Place a STOP buy on the shares at $70.00

Rationale: Opening cost of the trade is high, but the benefits are abundant:

First, breakeven comes at $60.50 (stock price is $61.37).

Maximum gain is unlimited.

Maximum loss, with proper STOPs in place, is $19.00, should the stock trade north of $70.00 at expiration – an eventuality we mark as highly unlikely.

As for the STOP, it must be switched to a STOP sell at 70 should the initial STOP be triggered.  Thereafter, an open STOP at 70 must be in place until the trade is closed in order to keep the trade square.

With kind regards,

Hugh L. O’Haynew

 

3 responses to “Closing One for 136%! – and Playing the Human Chattel Trade (KFY,CELH)”

  1. Hugh L. O'Haynew says:

    bs’d
    Small error to report in the mail-outs that arrived this morning.
    We noted the breakeven for the trade, then mentioned it was currently ITM.
    It is not ITM.
    It’s slightly OTM.
    Apologies,
    Hugh

  2. Max Reinier says:

    VMI Synthetic Put
    Hi, today VMI was up and down multiple times through the 240$ limit for Stop Buy and Stop Sell orders . I ‘ve been executed twice , first on the buy , then on the sell .
    My short call leg is now naked , not very comfortable…
    What do you suggest ?
    A Buy Stop at $245 ? ( loss of 500$)
    Or any other trick ?
    Thanks

  3. Matt McAbby says:

    bs’d
    Hi Max,
    Good to hear from you.
    Looks like it’s cooling here, but action is required.
    Your solution is likely best.
    245 will give it some play, and still limit your downside.
    Be sure, however, to lower the STOP as price declines.
    And may the Holy One of Israel be with you!
    Matty

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