In yesterday’s Tematica Investing we not only noted the growing volatility in the stock market following a growing number of disappointing September quarter results and current quarter outlooks, we reset our expectations for Under Armour (UA), given a significant cut to the company’s profit outlook between 2016-2018. That reset in not only our price target, but those across Wall Street as well, pressured UA shares and weighed heavily on our UA call positions. With our new UA price target set at $40 in Tematica Investing — well below the $50 strike price for our UA January 2017 calls — we are marking the following move:

We added these calls on September 28th at .20 and then again on October 28th at .23, but with the shares under significant pressure, we’re going to cut our losses why we can still recoup some of our investment and move on.

• Sell rating on the Under Armour (UA) January 2017 $50 calls (UA170120C00050000), which closed last night at 0.05.

 

One Man’s Loss is Another Man’s Gain

That same pickup in market volatility that pushed UA in the wrong direction has buoyed our ProShares Short S&P500 (SH) November 2016 $39 calls (SH161118C00039000) over the last week, bringing them back up to break even. With hundreds of companies issuing their quarterly results over the coming days, we expect a reset in earnings expectations for the S&P 500 is on the way.

• As such, we continue to have a Buy rating on these SH calls and we would consider buying them up to $0.45 and our protective stop loss remains in place at $0.20.

After the market close tonight, Amazon (AMZN) will report its September quarter results. 

We continue to be bullish on the Amazon (AMZN) January 2017 $800 calls (AMZN170120C00800000) that closed last night at 59.70. Fueling our bullish stance is the finding from a new survey from consulting firm Deloitte that confirms the accelerating shift toward digital commerce this holiday shopping season. Per the findings, 50 percent of survey respondents plan to shop online for gifts, giving the Internet a bigger lead than ever over discount/value department stores (43 percent), which rank as the No. 2 destination for gift shopping. Survey respondents anticipate they’ll spend 47 percent of their budget online – matching what they plan to spend at physical stores for the first time.

• Our protective stop loss on the AMZN January calls remains at $50, which locks in a gain of at least 43 percent on our remaining slug for these particular calls.

 

Second Place Isn’t a Bad Place to be for COST

As bullish as the Deloitte report is for Amazon, we also find it very favorable for our Costco Wholesale (COST) January 2017 $170 calls (COST170120C00170000)that closed last night at $0.26. Per the survey findings, the second place holiday shoppers will turn for this year is discount/value department stores — which bodes well for the warehouse retailer. Additionally, helping drive traffic to Costco’s warehouses this holiday season is the shift in consumer appetite for eating at home given the drop in grocery prices compared to the year over year increase in restaurant prices. Over the last several quarters, Costco has continued to grow its fresh foods business and as anyone who has visited a Costco location knows it’s meat prices — and quality for that matter — are hard to beat.

• We would continue to buy the COST January $170 calls up to $0.40. Given that we have now scaled into this position, we are installing a protective stop loss at $0.15.

Apple Event today to Provide Insight into OLED Calls

Before we get to Amazon’s earnings report after today’s market close, we will see Apple (AAPL) introduce several new products today, including redesigned MacBooks that are expected to feature a new dynamic function row that utilizes OLED technology and replacing the existing function key row. As you can imagine, we’ll be waiting to see if this lives up to expectations and how many product models include this new function row. If Apple wows with this new feature, it is likely to goose OLED demand, which would be very positive for our Universal Display (OLED) January 2017 $55 calls (OLED170120C00055000) that closed last night at $2.70 vs. our initial buy-in at $2.05.

• Ahead of the Apple event, we’ll boost our protective stop loss to $2.50 from $2.00, which will lock in a minimum return of 25%. 

 

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SUMMARY OF ACTIONS FROM THIS POST:

• Exiting our Under Armour (UA) January 2017 $50 calls (UA170120C00050000), which closed last night at 0.05.
• Continue to have a Buy on ProShares Short S&P500 (SH) November 2016 $39 calls (SH161118C00039000) that closed up over the last week.
• Continue to be bullish on the Amazon (AMZN) January 2017 $800 calls (AMZN170120C00800000) that closed last night at 59.70 maintaining our protective stop loss at $50.
• Installing a protective stop loss at $0.15 for our  Costco Wholesale (COST) January 2017 $170 calls (COST170120C00170000)
• Boosting our protective stop loss on the Universal Display (OLED) January 2017 $55 calls (OLED170120C00055000) to $2.50 from $2.00, which will lock in a minimum return of 25%.