Sell LE Put for an 86% Gain

By Linda McDonough • September 1, 2016

On Monday we felt Land’s End (LE) would report a quarter worse than expected when it release results today, and we recommending betting the stock would drop by buying puts.

We were right. the company reported a 6 cent loss per share, worse than the 4 cent loss expected.

So sell to close the September 16, 2016 put on Lands End (LE) with a strike price of $17.50 at $1.40 or higher, for a three-day gain of 86%. Symbol (LE160916P17.5)

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Howard

09/01/16 ‐ 10:36am ET September 1, 2016 at 10:36am ET

Current last sale quote is $0.58

Linda McDonough

09/01/16 ‐ 11:01am ET September 1, 2016 at 11:01am ET

Howard,
Options by nature are quite volatile and the put traded as high as $1.60. This option trade in particular was tied to a specific event, earnings this morning. These puts expire on September 16. I expect the stock to drop again but I would watch the trading closely to ensure a good exit price.
Linda

Howard

09/01/16 ‐ 11:05am ET September 1, 2016 at 11:05am ET

Linda,

Unfortunately, by the time I noticed the trade alert on the web site, the option price had recovered. I still have not received a trade alert.

I had not expected such a short duration of opportunity to close this morning, which is my fault.

Linda McDonough

09/01/16 ‐ 11:27am ET September 1, 2016 at 11:27am ET

Howard,
Let me look into the alerts and why they are not going out super fast. I would note that LE has a pretty high short interest so this mid-morning jump is likely related to short covering. The numbers were pretty bad and the company continues to lose money so I expect the stock to resume its drop.
Linda

Howard

09/01/16 ‐ 11:31am ET September 1, 2016 at 11:31am ET

Linda,

Thank you. No worries on my end as I trade with Jim’s OFI too. Today’s price events were a surprise to me. I’ll be patient waiting for the decline before the 16th.

Howard

09/01/16 ‐ 12:25pm ET September 1, 2016 at 12:25pm ET

I just got the trade alert email.

Linda McDonough

09/01/16 ‐ 11:28am ET September 1, 2016 at 11:28am ET

Also, in the future I will be sure to give an exit time line on these event linked trades.
Linda

Jack

09/01/16 ‐ 11:41am ET September 1, 2016 at 11:41am ET

Linda, by the time the alert went out the LE put was at 0.70 on Fidelity.
So will wait for a recovery before the put expires.
Jack

Jon D.

09/01/16 ‐ 11:45am ET September 1, 2016 at 11:45am ET

I was at the gym and food shopping so I missed that opportunity. I think I will just set it at 1.40 limit and keep an eye on it as well. I think it may soon go back in our favor. I will be patiently looking forward to recouping some back to school expenses.

Melody Pfingsten

09/01/16 ‐ 12:57pm ET September 1, 2016 at 12:57pm ET

Linda, I literally just got the trade alert one minute ago. So le is way over 18 dollars now. I am totally out of the money buy close over a dollar. You would have had to cover the moment the market open to get 1.4. This is very frustrating!

Linda McDonough

09/01/16 ‐ 1:01pm ET September 1, 2016 at 1:01pm ET

Melody,
I understand your frustration. We are working on ensuring that subs get text alerts immediately when trades are issued on options. I do expect LE to resume its drop. There is a significant level of short interest in this stock. Often in these situations if the stock does not stay down immediately there is a rush of short covering.
Linda

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