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Tuesday, February 27, 2024

Top Trades for Mon, 06 Jan 2020 14:53 – HRB

Top Trades for Mon, 06 Jan 2020 14:53 – HRB

HRB/Fel – I like HRB as it seems like a pattern that people tend to forget about them and lose interest each year but then, during tax season, everyone remembers HRB is a pretty good business and gets back into the stock and, of course, Q1 and Q2 are their big quarters and Q3 and Q4 (which ends 10/30) generally have losses.  It's like a high-speed cyclical:

I guess it would be a good Butterfly candidate but it stays down too long so we generally just play it bullish into April.  March earnings are not likely to be exciting but, for the Earnings Portfolio, let's play HRB like this:

  • Sell 5 HRB 2022 $22 puts for $3.50 ($1,750) 
  • Buy 15 HRB July $20 calls for $4.10 ($6,150) 
  • Sell 15 HRB July $24 calls for $1.60 ($2,400) 

That's net $2,000 on the $6,000 spread so $4,000 of upside potential at just $24 is a nice, conservative way to make 200% – though you have to wait a while on the put side.