Saw a good LABU (3x Biotech) idea in the Webinar for the STP:
- Sell 5 LABU Dec $45 puts for $5 ($2,500)
- Buy 10 LABU Dec $55 calls for $19 ($19,000)
- Sell 10 LABU Dec $70 calls for $12 ($12,000)
That's net $4,500 on the $15,000 spread that's $11 ($11,000) in the money with $11,500 (255%) upside potential at $70.
Also, from the morning post, we liked a new long on Supervalue (SVU), which is already in our LTP and OOP:
Finally, also worthy of discussion tonight, is one of the victims of the AMZN/WFM merger – SuperValue (SVU), who we think were unjustly punished in plunging 25% since the announcement. SVU has been re-orienting themselves as a wholesaler and people are worried that that's the space AMZN is going to be pressuring but, if that were the case, why would they buy the highest-end of the food chain? They are paying $14Bn for Whole Foods, who have 500 locations while SVU has 2,000 much bigger stores for the bargain price of $800M at $3/share. Maybe Amazon will ALSO buy SVU..
In any case, SVU made 0.13 last quarter and are on track to hit their 0.36 target, which makes them kind of a good deal at $3, and we can improve that price considerably using an option spread as follows:
- Sell 50 2019 $3 puts for 0.45 ($2,250)
- Buy 50 2019 $2.50 calls for 0.80 ($4,000)
- Sell 50 2019 $3.50 calls for 0.35 ($1,750)
That's a net entry of $0 on the $5,000 spread and your worst case is owning 5,000 shares of SVU at $3. The trade is starting out $2,500 in the money and you only need to get back to $3.50 to collect the full $5,000 with an infinity percent gain on cash! We already have a similar play in our Options Opportunity Portfolio as well as our Long-Term Portfolio but this dip is a great chance to get in at very low prices.
