Posted on October 13, 2021
Two trades to close today before we move to wrestle with all you home-office types!
But before we begin, a quick note.
We’re booking the trades with closing numbers from last Friday.
But with S&P futures set to open lower, it’s very likely you’ll fare better than what we’re posting here.
May the G-d of Heaven and earth, the Holy One of Israel, deliver you redemptive winnings– and may the Yoke of Heaven ever be upon you.
The first is our bet on ACI from August 8th that arrived in a communiqué called Albertson’s CEO Defies Shorts: Claims Batflu Delirium Led to Craving For Finer Cuts of Beef.
There, you’ll recall, we urged you to sell the ACI October 15th 29/32 CALL spread for $1.05 and buy the ACI October 15th 31 PUT for $2.75. Total debit on the affair was $1.70.
Today, you can buy back the short 29 call for $0.15 and sell the long 31 PUT for $3.80.
That gives you a full $3.65 on just $1.70 laid out – or 115% inside two months.
And that’s lip-smackin’ good!
Now we turn to our XYL trade of September 13th. The letter was called Xylem’s Turn to Get Hosed, and therein we recommended you sell the XYL January 21st 135/140 CALL spread for $1.90 and buy the XYL January 21st 125/115 PUT spread for $3.05. Total debit was $1.15.
And whaddaya know…
Today the short CALL spread can be repurchased for $0.95 (2.00/1.05) and the PUT spread can be sold for a water-logged $3.90 (8.10/4.20). That gives you a NET take on the trade of $1.80 on $1.15 spent.
And that’s a very handy 156%.
You got it, Gerald.
We’re trading Avery Dennison today (NYSE:AVY), because these sticker machers have essentially come unglued from stock market reality.
Well, there may have been a case when the Batflu home-office craze was at its viral peak, but as you’ll shortly see, the stock has done nothing for the last half year, while fundamentals remain stretched.
To wit –
Altogether, we don’t believe it will play out well when Q3 earnings are announced on October 27th.
In fact, we think the band-aid is already getting ripped from AVY’s downy soft skin.
Just look at the chart –
This is the daily for the last six months, and it shows –
Look now at the weekly –
The weekly technicals offer additional indictments.
And it’s for all the foregoing that we’re stepping out in the following fashion –
A Jew and His Money recommends you consider selling the AVY November 19th 200/210 CALL spread* for $4.80 (12.40/7.60) and buying the AVY November 19th 210 PUT for $10.90. Total debit on the trade is $6.10.
Rationale: the trade offers an UNLIMITED return for a debit of $6.10.
Maximum potential loss is $16.10 (difference between the CALL strikes plus the initial debit).
Breakeven on the trade arrives at $202.95, a mere 1.8% below the current price of $206.77.
The overall technical picture and existing support lines indicate a potentially steep fall over the short term, which would offer an opportunity for quick closure of the trade.
May it be His will.
With kind regards,
Hugh L. O’Haynew