Sell VFC Put for 80% Gain
Sell to close the Nov. 18, 2016 put on VF Corporation (VFC) with a strike price of $62.50 at $4.40 or higher for an 80% gain. Symbol (VFC161118P62.5)
When we bought these puts less than 3 weeks ago we expected to hold them for a longer period of time. However the stock dropped immediately and the put position is now up 80%, a gain that is hard to resist not booking.
The stock has been downgraded by two brokerage firms in the past week, both noting a promotional environment for the North Face and struggles with the Vans and Timberland brands.
Although we are taking this gain, I do expect the stock to drop lower over before the November expiration. Some option holders may prefer to hold the put but keep a mental stop of $4.40.
Stock Talk
Diamond Bob
How low do you expect the stock to go? Would it be smart to close a portion of the position and wait for a further decline?
Thanks, DB
Linda McDonough
DB,
That’s a good strategy. My super bear target for VFC is the low 40’s but I’m not sure if it will hit that level before the November expiration. I will be closely watching this one to possibly buy another series of puts in the future.
Linda
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Jon D.
Hi Robert,
Don’t know the % right now, but pleased with the profit. Its the sort of profit I can use every month $1150; and sold it the week before the sell alert came out.
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Dr. C
The VFC trade was a good one, thanks. I am a bit confused however, because I read in one place we are still in the trade, but here it recommends getting out???? The original premise was to wait for a sell off on expected disappointed earnings report in Oct.. Now I don’t think there is anything wrong with taking Profits, I also believe in working the trade based on our updated information but the going in strategy unless there is a reason to believe that thinking is now faulty….. So do you still believe the earnings report is going to be disappointing. Do you think there is a big risk that the price could firm rapidly…or is it likely to continue to disappoint for another 8-10%??? Don’t want to be greedy but I know I have to let my profits run and cut my loses short even though that is really difficult to do some times….
Linda McDonough
Dear Dr. C,
As I noted in the alert I do believe the stock’s fundamentals will disappoint and specifically noted that some option holders may prefer to hold the put but keep a mental stop of $4.40. While my original intention was to hold the put until the news event, options’ value can swing wildly and their value will usually deteriorate over time unless the option is in the money. I thought it prudent to suggest taking profits with an 80% profit.
Best,
Linda
Linda McDonough
For those of you lucky enough to still be holding the VFC Nov 62.5 puts, Merrill Lynch downgrade the stock to under perform this morning from buy and lowered its price target from $73 to $54 while dramatically lowering estimates- a trifecta for the bears. The stock is trading down a few dollars before the open so you may see a nice jump in the put prices today.
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Linda McDonough
Dr. C-
Please see the note I posted on VFC this morning on Stock Talk (Sept. 15).
Best,
Linda
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