Trade Summary: November 3, 2014

| November 3, 2014

November 3, 2014

 

 Trade Rationale

It’s that time again! Believe it or not, we’ve officially entered “holiday season” once again. It’s November and Halloween has come and gone. That means the retail world will be shifting their marketing campaigns into overdrive in anticipation of the holiday shopping season.

Today’s theme will attempt to capitalize on trends related to holiday season spending. Of course, consumers aren’t the only ones that spend. Companies also have to spend money to prepare, and there’s always a lot going on behind the scenes.

This time of year for investors is more than just how retail stores perform. There are trends which will help some companies and hurt others. (For instance, the biggest of these trends is the shift to online shopping.) As trends change, so do the investment opportunities.

As such, we’re going to make three trades based on which companies should do well (or not so well) during the upcoming holiday season.

First off, we’re going to buy calls on CH Robinson Worldwide (CHRW). The logistics company is a $10 billion freight transportation company. And, as you may have guessed, transportation companies tend to do very well during the holiday season. I’m picking CHRW because it’s more reasonably priced than some of the other transportation and shipping companies you may be more familiar with.

We’re also going to go a more traditional route and buy calls on The Gap (GPS). The undervalued clothing store is due for a rebound, and holiday season is a great time for that to happen. Not to mention, clothing stores haven’t been hit as hard by the trend to online shopping. People still like buying clothes in person.

Finally, we’re going to take the opposite position on Barnes & Noble (BKS). Unlike clothing stores, book, music, and video stores have been decimated by online shopping. BKS is basically the last major bookseller standing. And, this time around, the company’s NOOK tablets are rapidly losing ground to Amazon’s (AMZN) Kindle products. I think the company could be in a for a disappointing holiday season.

Keep reading for the details of each trade.

 

Trade Details

#1) Buy CH Robinson Worldwide (CHRW) January 70 Calls up to $1.90

This trade profits from an upside move in CHRW. Our first profit point for conservative traders is at $72. For aggressive traders, you can hold up to $75. For risk control, the conservative exit level is $63. $60 is the final exit level for aggressive traders.

CH Robinson Worldwide

#2) Buy The Gap (GPS) January 38 Calls up to $2.00

For GPS, we’re also looking for a higher move. Our first exit point for conservative traders is at $40. For aggressive traders, you can hold to $44. For risk control, the conservative exit level is $36. And, $34 is the final exit level for aggressive traders.

The Gap

#3) Buy Barnes & Noble (BKS) January 21 Puts up to $1.80

Finally, we’re looking for a downward move in BKS. Our first profit-taking exit point for conservative traders is at $18.50. For aggressive traders, you can hold down to $16. For risk control, the conservative exit level is $24. $26 is the final exit point for aggressive traders.

Barnes & Noble

 

Category: AOA Trade Summary