Shares in Kate Spade (Ticker: KATE) got crushed on Tuesday, losing roughly 25% of their value to hit a new low of $28.30 after the retailer reported second-quarter earnings prior to the open. The stock is rebounding today, up approximately 7.0% on the session to trade at $31.00 as of 1:00 am ET. Options activity on the clothing and accessories company suggests one strategist is positioning for the price of the underlying to continue to recover in the near term. It looks like the trader purchased a 2,000-lot Sep 31.0/35.0 call spread at a net premium of $1.40 per contract. The strategy makes money if shares in Kate Spade rally another 4.5% over the current price of $31.00 to exceed the average breakeven point at $32.40, with maximum potential profits of $2.60 per contract available in the event that the stock jumps 13% to $35.00 by September expiration.
Chart – KATE shares rebounding from Tuesday’s drop
This article will become free after 48 hours (see below for free content). To read the rest of this article now, along with Phil's live intra-day comments, live trading ideas, Phil's market calls, additional member comments, and other members-only features - Subscribe to Phil's Stock World by clicking here.
Tags: KATE
This entry was posted on Wednesday, August 13th, 2014 at 2:23 pm and is filed under Uncategorized. You can leave a response, or trackback from your own site.
Do you know someone who would benefit from this information? We can send your friend a strictly confidential, one-time email telling them about this information. Your privacy and your friend's privacy is your business... no spam! Click here and tell a friend!
