What fun gyrations we are having today.
BIG/Jeddah – They are a great value down here at $42.36 as that's $1.4Bn and they make a steady $200M/yr and made $600M last year, not less.. The earnings due to supply chain issues will go away eventually so it's perfect for a long-term investor. We had a position in the LTP and closed it out around $60 but the original spread on 4/14 was 2023 $40 puts with the $45/65 bull call spread. It's probably early to call for a re-entry but no harm in taking a small position we can scale back up in the LTP:
- Sell 10 BIG 2024 $40 puts for $10 ($10,000)
- Buy 20 BIG 2024 $40 calls for $11 ($22,000)
- Sell 20 BIG 2024 $55 calls for $6.20 ($12,400)
That's a $400 credit on the $30,000 spread and our worst case is owning 1,000 shares of BIG at $40 but then we could sell the 2025 $40 calls for $10 and more puts for $5 and we'd drop the net to $25 on our first 1,000 and maybe $35 for the next 1,000 so – as long as we don't mind owning 2,000 shares of BIG for $25 (40% off) – what's not to love?
XRX/Yodi – We never followed through with them as we decided to cash out right after that pick but yes, I like them better now and, for the LTP, we can put in a placeholder by selling 10 2024 $25 puts for $7.85 ($7,850) as the worst case there is having to buy 1,000 shares at net $17.15, about 15% off the current price.
