27.3 C
New York
Wednesday, May 8, 2024

Top Trades for Wed, 14 Apr 2021 11:27 – BIG

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Top Trades for Wed, 14 Apr 2021 11:27 – BIG
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Found another good one for the LTP, Big Lots (BIG) is doing well at $69 but that's still only $2.5Bn and they made $629M last year and should normalize going forward at $200M but $200M is fine for $2.5Bn.  The bonus money came from selling off distribution centers last year but, going forward, they are just a nice, little business.  Debt is $50M and $550M in cash so really it's more like a $2Bn net of cash valuation on $200M in earnings – I love that.  

I'm sorry we missed them when they were down but should be fun to play and we don't mind owning them for $40 so, in the LTP:

  • Sell 10 BIG 2023 $40 puts for $6 ($6,000) 
  • Buy 15 BIG 2023 $45 calls for $30 ($45,000) 
  • Sell 15 BIG 2023 $65 calls for $20 ($30,000) 
  • Sell 5 BIG July $75 calls for $4.75 ($2,375) 

That's net $6,625 on the $30,000 spread so $23,375 (352%) of upside potential at $65 is already in the money and, if we can sell 6 more out of the money calls for $2,000+, we'd be into a net credit on the trade without even trying.  Worst-case is we end up owning 1,000 shares at around $40 (depending on sales), which is 42% below the current price – that's a downside we can live with!  

TDA/Snow – Well of course they are going to SAY that but they sure don't act like it the way they are treating their clients.