From this morning's PSW Report:
There are still some earnings too – including Big Lots, which reminded me to look at Overstock (OSTK), who bought the assets of Bed, Bath and Beyond for $21.5M. While BBBY went Bankrupt, they were doing $11Bn in sales in 2022 (losing $700M) but OSTK, who had $2Bn in Sales and lost $35M, did not buy BBBY’s store leases or staff – they bought the name and the remaining merchandise and, most importantly, the customers!
We didn’t buy them in June and I regretted that but, fortunately, traders already became impatient and have since sold the stock back to $24 and Jeffries just reported yesterday that 589,000 people downloaded the Bed Bath and Beyond app this month – 178% more than last year and Daily Active Users popped 91% over last year.
If OSTK can capture just 10% of BBBY’s business, that’s a 50% annual increase in their own business and I’m sure they are smart enough not to be trying to capture the unprofitable sales so, for our Long-Term Portfolio, let’s:
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- Sell 20 OSTK 2025 $20 puts for $4.40 ($8,800)
- Buy 50 OSTK 2025 $20 calls for $10 ($50,000)
- Sell 40 OSTK 2025 $35 calls for $5 ($20,000)
- Sell 10 OSTK Oct $25 calls for $2.10 ($2,100)
That’s net $19,100 on the $75,000+ spread and we’ve only used 56 out of 511 days we have to sell so let’s say we have a path to selling 8 more short-term calls for $2,000 – that would be $16,000 of income while we wait on our $75,000. If OSTK goes lower, we still sell short-term calls, possibly more than 10 at a time and we use that money to roll the $20 calls to the $15 calls (now $12.30), which would cost $11,500 – less than we plan to collect selling longs.
