Three Bears on Digital Ad Spend- Criteo, Snap and Omnicom Puts
The Trades:
Buy to open the July 20, 2018 put on Criteo (NSDQ: CRTO) with a strike price of $30 at $3.10 or lower. Symbol (CRTO180720P30)
Buy to open the June 15, 2018 put on Snap (NSDQ:SNAP) with a strike price of $16 at $1.75 or lower. Symbol (SNAP180615P16)
Buy to open the July 20, 2018 put on Omnicom Group Inc. (NYSE: OMC) with a strike price of $72.50 at $3.75 or lower. Symbol (OMC180720P72.5)
I suggest a $.05-.10 range on my suggested prices. There is not a near-term event that requires you to enter these trades immediately so you can wade in with half a position today and one half later with the hope that prices for the options come down a bit.
The Rationale:
Digital ad companies are getting hit from all sides.
- Consumer product companies are rethinking their digital advertising strategies. In the past year, Unilever (NYSE: UL) and Proctor and Gamble (NYSE: PG) have both cut digital ad spending dramatically. Recent events with Facebook’s data issues will not change the direction of that spending.
- Customers are demanding more transparency and often dissatisfied with how often or what placement their brands receive in digital ads. The value of digital ad dollars is being questioned.
- Facebook, one of the largest beneficiaries of the tsunami of digital ads, implemented a new algorithm last month to prioritize what its system perceives as quality over quantity. User backlash has ensued and Facebook now has less inventory (posts on user feeds) available for digital ads to be shown.
- Middlemen like Criteo, have been caught off guard by new ad-blocking technologies that cut off their lifeline of digital ads. Facebook is one of Crtieo’s largest partners for ad delivery and should see its numbers further deteriorate if Facebook’s revenue slows.
- Omnicom has been caught flat-footed with slowing growth from traditional ads and little footing in the digital domain.
- Snap’s user base growth is slowing dramatically and the company is burning huge amounts of cash with no end in sight. Recent celebrity disdain for Snap will likely weigh on user counts. Instagram’s stories feature is siphoning user time from Snap.
Earnings dates for each company is on or around the following dates. I will issue more details as the companies release firm dates:
Omnicom April 17
Snap May 10
Criteo May 2
Stock Talk
Paul
All Three filled at recommended prices on Fidelity.
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Phil Ash
CRTO at $3.01 just now. Waiting on lower limit prices for the others.
Asjad Shamim
Hi Phil and Linda, New to PCA subscription… Can you please help to provide below information:
1) To Trade Profit Catalyst alerts, do i need “PUT” option approval Level3? Or Just Margin is okay?
Currently I have margin account and been using Velocity Trader. So VT approval on broker can be used with Profit Catalyst trades?
2) Using below trade as an example, this is just One Leg trade correct?
To clarify i understand correctly, the ask below is to Execute 1 Leg trade… Buy to Open July 20, 2018 PUT on CRTO with strike price $30. What is $3.10? Is it debit or credit limit? Do not see credit or debit limit options in 1 LEF Trade in ALLY.
Buy to open the July 20, 2018 put on Criteo (NSDQ: CRTO) with a strike price of $30 at $3.10 or lower. Symbol (CRTO180720P30)
Linda McDonough
Asjad,
In reverse order- yes to date, all of my options trade suggestions have been one-legged trades. I expect this to continue. All options trade suggestions are buying long (or buy to open) calls or puts.
If you are already trading options with OFI or VT, my guess is that you are approved for these basic trades but you could also take a look at the Investing Daily Options Guide, which can be found under the FAQ tab on the Profit Catalyst Alert site.
Please let me know if you have any other questions.
Best,
Linda
Asjad Shamim
HI Linda,
Thank you for the prompt reply 🙂
One more question… Is there a dedicated day in a week where trade alerts come out? Or it comes out whenever you see potential for making profit?
Thanks.
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Asjad Shamim
Another question for rookie…
1) The price after strike price you mention in your alerts, are those limit price?
2) What happen if the limit price goes down from what you suggested, do we roll or wait to bounce back?
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Phil Ash
These are not spreads with a debit or credit. These are more like just buying a stock long or selling it short for a limited period of time. I believe Linda only buys calls and puts. So you would be paying a limit price (or debit, if you will) to get into the trade. $3.10 x 100 shares in this case.
Linda does not offer guidance on price adjustments. If you don’t get filled at $3.10 it’s up to you if you want to adjust and pay more to get in. The more you pay, the lower your return.
Linda does not roll these trades. They either work or they don’t in the first attempt.
The trades come out at random times as opportunities arise.
Asjad Shamim
Hi Phil,
Thank you for the response.
One last question…
Since there are no rolls so let say you bought at certain strike price with some limit price. Then next day the price of that stock goes down and stuck that way for few months. So do we just wait for it bounce back to make it even?
Or we just loose that?
Linda McDonough
Asjad,
Phil is correct in all these responses. The risk of buying puts and calls is that they expire without any value at expiration. I do my best to avoid that situation but it does happen sometimes. I attempt to time the chosen expiration date with stock specific events so that I know when the most likely date is for a move in the stock.
Best,
Linda
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Phil Ash
Asjad,
Your example is referring to the purchase of a call option. If you buy a strike price of $100 and the stock is trading at only $95, then the option is out-of-the-money and likely in a losing position. Let’s say there’s another month left until expiration. You could decide to Sell to Close your option at that time and lose, for example, 50%. Or you could decide to hold until expiration in hopes that the stock will rise above $100 and have value. But, with every passing day, you also run a greater risk that you could lose 100% if the stock never rises above $100.
I recommend following Linda’s advice on when to get in and out of the trade. But I just want to point out that you can choose to close a trade earlier if you’re nervous about losing 100%. Alternatively, you can stay in a trade longer if you’re feeling greedy. For example, when Linda advised selling the FB puts early, I sold half my position and kept half. At present, I feel pretty smart/lucky about that decision, but markets can move quickly.
Options are complicated to figure out at first. But keep following Linda’s advice, and it will eventually sink in. We were all beginners once.
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Mark F
Partial fill of CRTO @ $3.00
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Rick
Filled all three on Fidelity as follows:
CRTO – Put DR spread Jul 2018BTO $32.50 STO $25 for $3.45 DR
SNAP – Put DR spread Jun 2018 BTO $17 STO $12 for $2.17 DR
OMC – Put DR spread Jul 2018 BTO $75 STO $65 for $3.78 DR
Raised the Long Puts to a little more conservative level and sold short puts to compensate for higher fills on long puts.
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mrbb
The Personal Finance growth portfolio recommends purchase of CRTO with a limit of $30. I bought CRTO stock yesterday for $30. I realize this is simply 2 different opinions, but when there is a bull and a bear on the same site it causes some confusion. I suppose I could buy the put for downside protection but then I will need a 10 per cent increase in the stock price to break even. So my thought right now is that if the stock bumps up enough to cover the commissions I’ll just close it out and leave it alone. Similarly I’m long OMC due to a recommendation from a reputable newsletter from a different site that I have followed with success for years. I’ve been investing for over 50 years so I certainly know that every seller needs a buyer and vice versa. The take of this dividend oriented letter is that OMC was trading at a historically high yield. But I appreciate your perspective and it’s one I need to keep a close eye on. But from what I can tell OMC’s dividend is safe which will tend to support the price. So I’m left with SNAP which I think is a great reco if I can get a fill. But I would be amiss if I didn’t thank you for HSC, which I never would have found but for this site. Up $1 in one day in a down market! I’m hoping that this will continue to be a big winner. Thanks!
Linda McDonough
Mrbb,
Thank you for the comments. Interestingly enough, Profit Catalyst Alert was long Criteo for over a year and saw a 44% gain melt into an 11% loss when I closed it out. I was a big believer in the stock but the industry is changing quickly and I think they got caught flat-footed.
Each service on the site has a very different angle. Some are valuation oriented, others tied more to a particular industry or technical chart analysis. Personal Finance typically takes a much longer-term approach to stocks. I am looking for a shorter-term move.
You have a good point on the OMC dividend, which I think will act as a floor once the estimates stop coming down.
Best,
Linda
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Cyan
I also got filled at the recommended prices for all three.
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Stanley
SNAP filled for 1.75 @ Fidelity
CRTO and OMC didn’t fill yesterday and is currently considerably above target price.
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George McMillion
SNAP filed at $1.75 on TDA. As noted by others , CRTO and OMC trading higher.
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John N
SNAP filled for $1.60 @ ALLY
John N
Decided to sell this today at $2.55 and bank a 59% profit. Rather take it now.
Thnx Linda!
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Edward Getchell
Linda, in a recent Investing Daily posting, “Hot Hot Hot! ZScaler Ignites the IPO Market” you alluded to a similar cloud security company that had been recommended in late 2016 in Profit Catalyst but you did not name that company. I couldn’t find any company in the PCA portfolio that matched the performance you claimed. Could you tell me what company you were referring to?
Ed
Linda McDonough
Ed,
I am referring to Carbonite (NSDQ: CARB), which has come down a bit in the past few days so is up 74% now. Due to deadlines, the article was written Monday morning when the stock was still up in the 90 range. I still think it’s a very interesting story.
Best,
Linda
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Jeffrey Shultz
Linda,
You ain’t half bad at this here options and analysis thing. You might oughta consider doing it for a living.
Thanks for the info above. It’s looking really good in the early going. (And thanks again for the quick HSC in & out.)
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Abhi A
Linda should we still be chasing OMC and CRTO? Did not make it in on these options in time.
Linda McDonough
Abhi,
I would not chase any of these options. The market is so volatile that I think you will have another chance to get involved around the suggested prices.
Best,
Linda
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Mark F
Bought OMC $72.50 7/20 put @ $3.70 today.
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Mark F
Sold CRTO Put for $4.50.
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Stanley
Decided to sell snap took a 45% profit
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Toro
Linda – what is the plan with OMC earnings coming on 4/17. Do you expect to take profits before then or do you expect them to bad enough to wait ?
Linda McDonough
Toro,
Unless the stock has a big move before next Tuesday morning, my plan is to hold on. Recent comments from Proctor and Gamble note further ad agency spending cuts and I believe the Facebook data crisis will be a major issue going forward for digital ad spending. There is always the chance that these negative trends don’t fully hit OMC’s current quarter but I expect future guidance to be tepid.
Best,
Linda
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Linda McDonough
Subscribers,
OMC reported a decent headline number. However, revenue growth was derived almost entirely by positive currency movements. Guidance is tepid. The market, however, is super strong and the stock has opened up. The company’s conference call is still going on. I am going to watch the stock for a bit as I don’t think the numbers support a rising stock. That said, I don’t want to be stubborn and argue with the market.
Best,
Linda
Stuart Housden
OMC seems to be poised to go higher with the rest of the market. Is now a good time to cut our losses or do you still feel OMC will decline before mid-July?
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Abhi A
Bailed out at 4.15 while still making profit. Who knows if it will go up or down. Been a long time waiting.
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