- Arconic (ARNC +6.1%) marches higher after multiple insiders bought shares this week.
- On May 20, CEO Tim Myers bought ~13K shares at an average $10.37/share, CFO Erick Asmussen purchased 20K shares at an average $9.94, Chief Legal Officer Diana Toman acquired ~10K shares at an average $10.49, and two board members also bought shares during the week.
- Shares spurted higher after Credit Suisse began research coverage with an Outperform rating and $22 price target, saying the company faces a "major inflection point" in Q3 as Ford and GM accelerate production.
That's more reliable as GM and F are certainly moving to more electrics and need lighter cars. They made $60M last Q and $144M in Q4 and should be good for about $160M in earnings and you can buy the whole thing for $1.3Bn at $12 so I'd say it's really undervalued as people haven't seen enough after the AA spin-off to value it properly and the virus disrupted their story getting out.
So, ARNC is a great addition for our Future is Now Portfolio and we can start with:
- Sell 10 ARNC Jan $10 puts for $1.55 ($1,550)
- Buy 20 ARNC Jan $8 calls for $5 ($10,000)
- Sell 20 ARNC Jan $12 calls for $2.60 ($5,200)
That's net $3,250 on the $8,000 spread that's currently 100% in the money with a $4,750 (146%) potential gain in 8 months if ARNC simply stays above $12. Downside risk is owning 1,000 shares at net $13.25 (if the bull call spread is wiped out), so it's a little aggressive but the net margin on the puts is only $617 – so we can easily double down if we get in trouble.
FL/Jeff – We know this Q would suck – hard to sell when you are closed. Half the stores are still closed so next Q will suck too. They dropped EPS expectations from $1.54 to 0.36 but that's not a loss and they RAISED 2021 from to $3.90 from $3.28 so, as long as you are a long-term INVESTOR and not a trader – you should be hoping they drop back to $20 so you can add more.
| FL Long Call | 2022 21-JAN 25.00 CALL [FL @ $25.89 $-3.43] | 30 | 5/20/2020 | (609) | $28,500 | $9.50 | $-1.35 | $9.50 | $8.15 | $-1.67 | $-4,050 | -14.2% | $24,450 | ||
| FL Short Call | 2022 21-JAN 37.50 CALL [FL @ $25.89 $-3.43] | -30 | 5/20/2020 | (609) | $-17,250 | $5.75 | $-1.95 | $3.80 | $-1.75 | $5,850 | 33.9% | $-11,400 | |||
| FL Short Put | 2022 21-JAN 25.00 PUT [FL @ $25.89 $-3.43] | -10 | 5/20/2020 | (609) | $-7,200 | $7.20 | $0.20 | $7.40 | – | $-200 | -2.8% | $-7,400 |
In the LTP, we're about net even and not enough price move to jump in and make adjustments. Buying back the short calls so early would be drastic but at 50% I'd strongly consider it and the 2022 $20 calls are $9.80/11 so let's say $10.50 and the $25s are $7.40/8.70 so let's say $8 and that's right on the cusp of where I'd want to roll lower but there's nothing so compelling that I'm dying to throw $7,500 more at this trade. It's not that off target and they should rebound so the best thing to do is wait, PATIENTLY, for Q2 earnings and THEN see about making an adjustment based on 3 months and 2 days worth of information since we initiated the 2-year trade rather than just the 2 days. 
