Yesterday, I sent you an alert to buy puts on Kohl’s (NYSE: KSS).
As you know, the stock had soared on its earnings announcement, but I expected that to be a temporary move since that wouldn’t alter its weak winter trend. So we took advantage of the company’s momentary rally to add a new put option on Kohl’s.
Well, today Kohl’s has plunged more than 10% — and that means we are set to collect a triple-digit gain in just one day!
However, since this seasonal trend lasts through the new year, I just want us to sell half of this position to secure quick gains as we typically do.
Here’s the trade:
Action to take: Set a Good ‘Til Canceled limit order to sell to close HALF the KSS January 2016 $45 put option (KSS160115P00045000) at $4.55. At last glance, it was trading at $4.10. If your order is not filled by my next dispatch, I will update you on the trade.
Keep in mind, many of you may have different entry prices because the options were moving quickly yesterday. In yesterday’s trade, I recommended you place a $4.70 limit order to sell half the position for a 100% gain. That was based on our $2.35 entry price.
However, the option closed yesterday at $2.26, so that’s the price we recorded in our books. As such, $4.55 is the price at which we want to get out in order to adhere to our strategy of selling half our positions for a 100% gain. If your entry price is $2.35, then this is still a solid 92% gain if you replace your order at $4.70 with this new order at $4.55.
It has been an interesting week, certainly, in Kohl’s. We originally initiated this trade last Thursday on expectations that the company’s winter sell-off would re-emerge, and it did. We were up 80% at one point earlier this week with our put options. But with earnings coming out this week, we implemented a strategy to protect our gains just in case of an earnings “beat” — which is exactly what happened. We got out with a 5.4% overall gain … but it was clear that Kohl’s seasonal downtrend would continue, despite the earnings hoopla. So we used our small profits from the initial trade to get back into the trade at a cheaper price … and now here we are just one day later on the cusp of a 100% gain.
Gotta love when a plan comes together!
Until next time, good trading…
Editor, Precision Profits