In April, we bought September puts on gardening and landscaping giant Scotts Miracle-Gro (NYSE: SMG). Historically, Scotts’ shares have weakened from early April through late summer.
This year, the stock initially followed that seasonal downtrend: In late May, it began plummeting. However, when August rolled around, the company surprised analysts by topping third-quarter estimates. The unexpected news gave Scotts’ stock enough momentum to briefly buck its historical trend. Shares rallied.
The stock has since pulled back, and overall Scotts has been in a general downtrend since April — falling roughly 2.5%. But the return to its historical pattern hasn’t been quite fast enough, and our puts remain underwater by 29%.
Since we hold September options, we are running out of time to see our trade play out. So let’s cut our losses today and move on to our next trade.
Action to take: Sell to close the SMG September 2015 $65 put option (SMG150918P00065000) at the market. At last glance, it was trading at $2.55.
Until next time, good trading…
Editor, Precision Profits