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Top Trades for Fri, 31 Jan 2020 12:23 – DFS

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Top Trades for Fri, 31 Jan 2020 12:23 – DFS
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DFS/Vkat – I posted earlier, insiders are buying at $75 and they are very interesting down here.  

Discover Financial execs buy the dip

  • Between Jan. 23 and 27th, Discover Financial Services (NYSE:DFS) shares sank 16% after two analysts downgraded the stock after the company's outlook for expenses in 2020 was worse than expected.
  • Four Discover executives took advantage of that lower share price and purchased 24,777 shares on Jan. 27.
  • CEO and President Roger Hochschild picked up 15,000 shares at $74.12 per share.
  • John Greene, executive vice president and CFO, bought 3,377 shares at $73.84 per share.
  • Wanji Walcott, executive vice president, chief legal officer and general counsel, acquired 3,400 shares at $73.95 per share.
  • Carlos Minetti, executive vice president, consumer banking, bought 3,000 shares at ~$73.74 per share.

For the LTP, we can simply play them not to go lower with this spread:

  • Sell 10 DFS 2022 $70 puts for $8 ($8,000) 
  • Buy 20 DFS 2022 $60 calls for $18.50 ($37,000) 
  • Sell 20 DFS 2022 $75 calls for $11 ($22,000) 

That's net $7,000 on the $30,000 spread that's in the money to start.  All DFS has to do is hold $75 and we make $23,000 (328%) and,  if they recover back to the $80s, we can even sell some short calls for income while we wait. 

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