Top Trade Alert – Dec 6th 2022 – Signet Jewelers (SIG)

    SIG Dec 6 2022.png
    SIG Dec 6 2022.png

    The reason SIG was rejected for a Trade of the Year finalist was my concern that the Recession would hurt them. Also, GS and other Banksters have stated bonuses will be lower this year – and those guys are a significant amount of Q4 clients.

    Still, a lot of pent-up wedding business helps and they are a good buy at $69, which is only $2.7Bn and they make $550M and should do a bit better when things steady out. $700M in cash over debt means you’re really buying them for $2Bn and the P/E is 4 – all good stuff.

    I think they are a good trade for the LTP as we can remind ourselves to watch them with the following:

      • Sell 10 SIG 2025 $65 puts at $17 ($17,000)
      • Buy 20 SIG 2025 $60 calls for $28 ($56,000)
      • Sell 20 SIG 2025 $80 calls for $21 ($42,000)

    That’s a net credit of $3,000 on the $40,000 spread that’s $18,000 in the money – so off to a good start. If SIG falls, we own 1,000 shares at net $62 (assuming we salvage nothing from the spread and don’t roll) and that seems like a fine thing to own so this is a Top Trade for sure!

    SIG Dec 6 2022.png