do<\/em>\u00a0discount aggressively, demand is absolutely there.<\/span><\/li>\n<\/ul>\nSo from a PSW standpoint, this is one to\u00a0make a structured trade in<\/strong>, not avoid:<\/span><\/p>\n\n- Use the selloff and low\u2011teens multiple to\u00a0scale in with stock plus short puts\/calls<\/strong>\u00a0rather than chase after the next earnings print.<\/span><\/li>\n
- Treat Black Friday as confirming that the brand isn\u2019t broken\u2014just adjusting price and assortment into a tougher macro tape.<\/span><\/li>\n<\/ul>\n
If you\u2019ve been looking for a catalyst to finally step in, \u201cbusiest apparel store on Black Friday\u201d is about as clean as it gets.<\/strong><\/span><\/p>\n![](\"https:\/\/substackcdn.com\/image\/fetch\/$s_!PQ9e!,f_auto,q_auto:good,fl_progressive:steep\/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F1404cdf5-24a6-4f99-be05-8e61685d11bd_2740x1541.png\")
<\/p>\n
I like LULU as it\u2019s a solid Top 10% stock and $183 is $22.7Bn but they are around $11Bn in sales with $1.5Bn in profits, so 15x(ish) is reasonable \u2013 especially as they have $1.9Bn in the bank net of debt \u2013 so call it 13.5x, really.<\/p>\n
That means they have plenty of cash to ride out a storm and they\u2019ve sown great ability to adjust their mix for changing market conditions. I think the harsh discounting is more of a test to decide if there\u2019s enough demand for lower-cost outfits to make it worth making shelf-space next year. Also they\u2019d want to test whether it erodes their high-end sales and Victoria\u2019s Secret has already proven you can hit both ends of the market at once (Pink).<\/p>\n
So we don\u2019t expect them to go \u201cvroom\u201d but I also don\u2019t expect them to go much lower so perfect for an income play.<\/p>\n
\n- \n
\n- In the STP, let\u2019s sell 5 LULU 2027 $180 puts for $34 ($17,000). That\u2019s just net $146 if assigned (20% off).<\/strong><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n
In the LTP let\u2019s:<\/strong><\/span><\/p>\n\n- \n
\n- \n
\n- \n
\n- Sell 10 LULU 2027 $180 puts for $34 ($34,000)<\/strong><\/span><\/li>\n
- Buy 20 LULU 2028 $150 calls for $73.50 ($147,000)<\/strong><\/span><\/li>\n
- Sell 15 LULU 2028 $200 calls for $53.50 ($80,250)<\/strong><\/span><\/li>\n
- Sell 7 LULU Feb $185 calls for $19 ($13,300)<\/strong><\/span><\/li>\n
- Sell 5 LULU Feb $180 puts for $16.30 ($8,150)<\/strong><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n
That\u2019s net $11,300 on the $100,000 spread so there\u2019s $88,700 (784%) of upside potential on the long spread and we have 700 days left to sell premium so at least (8 x $21,450 =) $171,600 (1,518%) of additional upside potential on the short-selling side of the business. Now that\u2019s a fun trade!<\/strong><\/span><\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":"
Today, 11:30 AM\u00a0Piper Sandler reports today that Lululemon was among the busiest U.S. apparel stores on Black Friday, driven by unusually broad discounting versus last year. Me to Boaty: \u201cI\u2019ve been thinking of adding LULU for a while and I just saw this note: \u201cToday, 11:30 AMPiper Sandler reports today that Lululemon was among the […]<\/p>\n","protected":false},"author":8,"featured_media":12850757,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[26305],"tags":[],"class_list":{"0":"post-12850756","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-top-trades"},"_links":{"self":[{"href":"https:\/\/www.philstockworld.com\/wp-json\/wp\/v2\/posts\/12850756","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.philstockworld.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.philstockworld.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.philstockworld.com\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.philstockworld.com\/wp-json\/wp\/v2\/comments?post=12850756"}],"version-history":[{"count":1,"href":"https:\/\/www.philstockworld.com\/wp-json\/wp\/v2\/posts\/12850756\/revisions"}],"predecessor-version":[{"id":12850758,"href":"https:\/\/www.philstockworld.com\/wp-json\/wp\/v2\/posts\/12850756\/revisions\/12850758"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.philstockworld.com\/wp-json\/wp\/v2\/media\/12850757"}],"wp:attachment":[{"href":"https:\/\/www.philstockworld.com\/wp-json\/wp\/v2\/media?parent=12850756"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.philstockworld.com\/wp-json\/wp\/v2\/categories?post=12850756"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.philstockworld.com\/wp-json\/wp\/v2\/tags?post=12850756"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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