From our Live Chat Room:
BHI/Burr – You would think not the way the stock is behaving. Earnings are 7/28 and I imagine they will have booked a $3.5Bn gain ($7/share) that will confuse everyone.
We already have a lot of BHI but, if you want to play for the pop, the Aug $42 ($3)/45 ($1.60) bull call spread makes a reasonable target at $1.40 (and no premium) and that can be offset with the short Jan $34 puts at $1.40 for a free crack at $3 with the worst case owning BHI for 25% off the current price or you can simply do the bull spread and only sell puts if earnings miss and they go lower but the they are getting a $7 per share breakup fee that is NOT reflected in the estimates:
| Earnings Est |
Current Qtr. Jun 16 |
Next Qtr. Sep 16 |
Current Year Dec 16 |
Next Year Dec 17 |
|---|---|---|---|---|
| Avg. Estimate | -0.59 | -0.44 | -2.11 | -0.07 |
| No. of Analysts | 31.00 | 31.00 | 24.00 | 35.00 |
| Low Estimate | -1.01 | -1.01 | -3.83 | -1.04 |
| High Estimate | -0.30 | -0.16 | -1.20 | 1.05 |
| Year Ago EPS | -0.14 | -0.05 | -0.48 | -2.11 |
Officially, in the OOP, let's:
- Sell 5 BHI Jan $34 puts for $1.40 ($700)
- Buy 10 BHI Aug $42 calls for $3 ($3,000)
- Sell 10 BHI Aug 45 calls for $1.60 ($1,600)
That's net $700 on the $3,000 spread that's $1,400 in the money to start.
Also in the OOP, on our main BHI position:
- Buy back the short Jan $60 calls (0.45)
- Roll the 2018 $40 calls ($9.75) to the $35 calls ($12)
- Sell 10 (full cover) 2018 $55 calls for $3.50
