AAPL/Batman – No worries. Keep in mind I'm still gun-shy and expecting a market correction, so I lean towards more protective plays.
Speaking of corrections – so we now have one trade in our brand new Earnings Portfolio (see Morning Report above) and CMG is tonight but too dangerous for a small portfolio. BA is tomorrow morning – that's scary enough!
IRBT took a pounding this year, back to $56. That's just $1.5Bn and they are good for $85M/yr in earnings – so 20x. We used to like them but bailed at $90 – and then they went up to $130 before finally falling apart. As with most stocks – if you wait long enough – they go on sale again.
IRBT spun out their military stuff so it's all consumer robots and they have a lot of competition now but business is still growing about 10% a year and would be doing better if not for trade war (most of their stuff is made in China and tariffed at 25%).
They are still in the tariff storm so I don't expect great things here but long-term they should recover so I do like the 2022s and we can play the following:
- Buy 10 IRBT 2022 $50 calls for $19 ($19,000)
- Sell 10 IRBT 2022 $65 calls for $13 ($13,000)
That's a simply net $6,000 on the $15,000 spread so $9,000 (150%) of upside at $65 and we're $6,000 in the money to start. If IRBT does well and pops, we're well on the way to a 150% gain in two years and, if it is flat or down, I have my eye on selling 5 of the 2022 $45 puts, now $10 ($5,000) to drop our net to $1,000 but 150% is very good money and $6,000 is not much to tie up and the margin on 5 short puts is $2,253 so we don't NEED to save the money so there's no sense taking a risk before we have more facts, is there?
