Wednesday, Abercrombie & Fitch Co. (ANF) announced its third-quarter profit earnings were up 43%. A chief source of growth was its teen chain, Hollister Co., jumping 8% in same-store sales. For the year, Abercrombie expects its EPS to be around $6.60 – up from $3.88 last year.
The company operates 851 stores in the United States and Canada. The supply sources of Abercrombie’s clothing line are primarily located in Southeast Asia, and Central and South America.
The sage Jim Cramer had this to say about Abercrombie on Wednesday, “I’m not going back into that cauldron… I am a seller of Abercrombie.” He noted when the stock was at 50, it was a good buy; at $72, Mr. Cramer is more tepid on Abercrombie.
Is it a good buy? The current P/E is 17 and the forward P/E is 15.60. And, despite Mr. Cramer’s lightning round rejection of the stock, it shot up nearly 1% on Thursday. And it’s a retailer with high third-quarter earnings and it’s going into the Christmas season.
Abercrombie’s stock appears to provide opportunities for bullish returns, but maybe we want to enter a position with some downside protection. Now the only question is “what can PowerOptions’ powerful option analysis tools do to make us some money and give us some downside protection?”
We know the stock symbol (ANF) and know we are interested in looking for bullish December stock options positions, so we can use PowerOptions Option Chain search tool. We will consider a covered call strategy.
| Abercrombie & Fitch Co. (ANF) $ 71.09 -DECEMBER Expiring 12/16/2006 26 days left | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Strike | Call Sym |
Opt Bid |
%Dnsd Prot |
%If Unch |
%If Asgnd |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 70 | ANFLN | 3.00 | 4.20% | 2.80% | 2.80% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 72.5 | ANFLV | 1.85 | 2.60% | 2.70% | 4.70% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The capital requirement for each of these trades is around $7,000 per contract. The first trade with the $70 strike price is attractive as it provides a nice potential return of 2.8% in only 26 days and also provides downside protection of 4.2%. The second position is out-of-the-money [OTM], provides a nice potential return of 4.7% in 26 days with downside protection of 2.6%, but requires the price of the stock to increase in order to experience the maximum potential return. Join PowerOptions today, and you too can start reaping the benefits of the covered calls and bull call debit spreads stock options investment strategies.
PowerOptions provides Internet based tools for analyzing stock options with specific search criteria and for finding potentially lucrative option income. For those seeking to execute a bull call credit spreads or a covered call investment strategy for their personal portfolios, PowerOptions provides an Internet based search engine for finding potentially lucrative income producing covered call options positions.
PowerOptions’ sister company PowerOptionsApplied provides expert stock option trading recommendations. PowerOptionsApplied specializes in covered calls, iron condor and selling naked puts stock options strategy recommendations. PowerOptionsApplied provides a 30-day risk free trial of its service.
[tags]Jim Cramer, ANF, Abercrombie & Fitch Co., bull call debit spreads, covered call investment strategy, covered call options, investment strategy, iron condor, option income, poweroptions, selling naked puts, stock option trading, stock options[/tags]