Whoa. Did you see that? Foot Locker (FL - Get Report) went to tape with quarterly results on Tuesday night. EPS? Beat. Revenues? Beat. Comp sales? You got the rhythm. Beat. Fundamentals? No problem. Cash dwarfs debt. Amazing current ratio. The stock has traded up 15% in the dark hours of early morning. Too late? Maybe. Nike (NKE - Get Report) is also trading higher in the wee hours.
That give me an idea. Dick's Sporting Goods (DKS - Get Report) reports next Wednesday, Nov. 28. Do solid results like float all boats? Maybe. Either that, or Foot Locker is stealing Dick's lunch. DKS does not have the balance sheet of a Foot Locker, but I would not say that it is a mess by any stretch.
I am not willing to bet the farm, but in a limited way ... coming out of Black Friday/Cyber Monday weekend? Worth a thought anyway, especially with the name selling off with the larger group all week. Check out Dick's chart:
Five months of sideways. Triple tops. Quadruple bottoms. If only someone knew how to make a directional play here in a risk averse way. Well, gang... that's kind of what I'm good at.
Here's what I'd recommend:
- Purchase one DKS Nov. 30 $35 call (implied value: $1.65)
- Sell one DKS Nov. 30 $39 call (implied value: $0.45)
Not a lot at stake here. The trader is merely risking $1.20 in an attempt to win back $4. This trader won't have to think much. Either lose $120 per contract, or best case, profit to the tune of a net $280. Might pay for some holiday shopping.
(Editor's Pick. Originally published Nov. 21.)