Use January Options to Play Lackluster Tiffany Ahead of Earnings
Aside from jewelry, it looks like consumers are stocking up on high-end electronics, including Apple and Harman products, for the holidays.
Finally, the global demand simply looks weak.
A stroll down Fifth Avenue past Tiffany's flagship shop this weekend showed traffic that seemed less than a typical weekend during the spring wedding season. Europe is dead in the water while Asia seems more infatuated with Gucci and other luxury brands.
Be aware that the company is set to report earnings this Thursday, November 29, and I don’t think the outlook will be upbeat. Even if the stock does hold up, I think once the holiday numbers start rolling in after the New Year, it will be set for a decline. The stock is running up to resistance around the $64 level and it is in danger of putting in a reversal today.
I don’t want to play this week’s earnings so I’m using January options to give some time for my thesis to play out. I have a downside target of $57 looking at setting up a put spread in the January options to capture that move. Specifically;
- Buy the January $62.50 puts for $3.30 per contract.
- Sell the January $57.50 puts for $1.40 per contract.
This is a $1.90 net debit for the spread. This represents the maximum loss that would be incurred if shares of TIF are above $62.50 on the January expiration. The maximum profit is $3.10 and this profit would be realized if shares of TIF are below $57.50 on the January expiration.
For more from Steve Smith, take a FREE 14-day trial to OptionSmith and get his specific options trades emailed to you along with exclusive access to his full portfolio. Learn more.
Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.