Today, a little spring cleaning is in order. We have one trade expiring next month: the Vail Resorts (NYSE: MTN) $87.50 puts. So today, we’re going to close it, which means we’ll being saying farewell to the last of our winter-related trades.
Action to take: Sell to close the MTN April 2015 $87.50 put option (MTN150417P00087500). At last glance, it was trading at $0.10.
We were clearly on the right trajectory with our Vail Resorts play. Following the downward trend we predicted in the original recommendation, shares had dipped below our strike price and had fallen to $85, putting us in a profitable position early on. But then Vail surprised Wall Street analysts with unexpected earnings strength tied to a purchase of another ski resort the company made last fall. Because the analysts were unprepared for the strength, their institutional clients were unprepared as well — and, thus, when the earnings surprised so dramatically, the institutional buyers rushed into the stock and the shares popped in a seasonally weak period when they should have flopped.
The shares have finally begun to show some signs of seasonal weakness, and they are likely to trend down from here. But we only have a few more weeks before our options expire, and I do not think the stock will weaken enough to turn our losses on this position into profits. So we are exiting with about a 97% loss on this option. We will recoup that beginning late this summer, when we buy calls on Vail going into its seasonally strong winter period (and, if you recall, Chris already expects the winter of 2015 to 2016 to be colder and snowier than we’ve seen in the last two cold and snowy winters).
In last year’s run-up to winter, we booked triple-digit gains on our Vail options, and we can expect the same outcome the next time around. Also, we’re already up about 43% on our recent Carnival (NYSE: CCL) trade we established last week, so we’re recouping some of those Vail losses there. You can see the rest of our holdings by clicking here.
Spring Storms In
Now that you’ve put away your winter jackets, it’s time to get out the rain coats. Spring has finally arrived, and, with it, the start of severe thunderstorm season.
Though early spring has been fairly tepid to this point, Chris Orr tells me that this season is going to be a harsh one.
Here’s a little of what he said:
Warmer air is beginning to flow from Mexico to Texas. The warm air will spread across the southern U.S. during the next month and as it works in fits and spurts to push the cold out of the way, severe thunderstorms will billow across the South, some producing tornadoes.
While the severe thunderstorm season is off to a slow start, I expect it to be very active from April 10 through June 10. The last two years have been relatively quiet, so if this season is as wild as I think it will be, expect for it to dominate the daily news.
Chris actually had a lot more to disclose about the coming thunderstorm season, so I asked him to record a video for you. Watch for Chris’ forecast video report in the coming weeks.
Finally, we have a string of trades coming up that will take us through summer and into early fall, so keep an eye on your inbox.
Until next time, good trading…
Editor, Precision Profits