Trade Alert: Earnings, 6/20/2023
A bearish bet against a company releasing earnings after the close.
Something sold by the company we’re betting against today.
Another Social Data Earnings Trade
We passed on last week’s social data earnings trade, but we’re taking this one. Social data estimates a decline in demand year-over-year of 24%, and is bearish on the stock. Zacks’ Earnings Surprise Prediction for it is neutral. Chartmill gives it a neutral 5 (out of 10) aggregate fundamental rating and a technical rating of 2 (one caution here: Chartmill gives this company a Piotroski F-Score of 8, which is excellent, but it’s also based on last quarter’s numbers). Portfolio Armor’s options sentiment on this stock is very negative.
Details below.
The company is La-Z-Boy (LZB 0.00%↑), and this is the trade: a vertical spread expiring on July 21st buying the $30 strike puts and selling the $22.5 strike puts for a net debit of $2.95. The max gain on 1 contract is $455, the max loss is $295, and the break even is with LZB trading at $27.05.
Exiting This Trade
For each debit spread trade, I’m opening a Good ‘till Canceled limit order to close it at a net credit of about 90% of the spread (the difference between the strike prices of the options). In the first trade above, we have a $7.50 spread ($30 - $22.5), and 90% of $7.5 is $6.75, so that’s where I’ll be placing my limit order to exit it. If that order doesn’t get filled this week, I’ll lower the limit price as necessary as we get closer to expiration.
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Exited this trade today at a net credit of $0.65, for a loss of 78%. Could have exited for about $2 last month. Probably should have.
LZB beat estimates on its top and bottom lines, though both were down double digits year-over-year. It also guided lower. Shares down about 5.7% after hours right now.