Just yesterday I issued a buy on the Lumber Liquidators (LL) stock as it traded around $34. Today, it’s 7% higher at $36.61… and the short sellers aren’t happy.
I didn’t recommend options at the time because the bid-ask spreads were too wide. But that has since changed.
While holding the Lumber Liquidators stock, consider hedging. I believe the stock could refill its bearish gap at $50 but want to protect for any “bear raid” potential.
For every two calls bought, consider buying one put.
- Consider buying to open the LL May 2015 37 calls up to $6…
- Consider buying to open the LL May 2015 36 puts up to $6.20.
Hold all other trades, including the McDonald’s (MCD) puts. MCD pulled back to $95 the other day before moving a bit higher with the broader market today. The underlying MCD stock is over-extended, as money flows out of the name.
Ian L. Cooper
Forgotten Profits