UPDATE: FAST: Getting Down to the Nuts and Bolts of Tomorrow Morning’s Earnings

by Dan April 11, 2011 11:30 am • Commentary

2nd UPDATE – April 12, 2011 at 10:20am: Ok well I was a bit early on my 1st update, now the stock below $65 down 3.5% and those APR 65 puts are starting to get some juice.  The spread can now be sold for 1.00, doubling your money.  At this point you have to make a tough decision, the Apr 65 puts are about a 50 delta, so they are saying you have a 50/50 chance on Friday expiration of being in or out of the money….if they are above 65 then u lose 1.00, if they are below then you will make the difference between the strike and the current spot.  With the stock turning on the call and the market weak at this point you may want to let this ride for a little this morning, maybe things get sloppy.

UPDATE – April 12, 2011 at 9:50 am: FAST reported and beat expectations, call still going on but stock only down 1.25%….I am selling the spread at .40 and moving on, not going to wait for guidance…..as I said yesterday, i did a little work on the name, didn’t have high conviction and nothing is going on so I am going to move on to bigger and better.

FROM April 11, 2011:
Those of you who know me are probably thinking I am stretching it a bit here, FAST, a nuts and bolts wholesaler and retailer??  Well you got me, I am a little bored…….But lets take a look at this one for shits and giggles.

EVENT: FAST ($67.70) Report Q1 earnings tomorrow morning (pre open)

-Options market implying about a 4% move vs the average over the last 8 quarter of about 3.35%

PRICE ACTION / SENTIMENT / TECHNICALS:

-Stock is up 13% YTD, with all of it coming in the last month. Stock up 50% since Sept 1, 2010 vs S&P500 up 27%.

-wall street analysts kind of mixed on the name with 4 Buys, 6 holds and 1 sell.

-So you may ask what draws this very tech centric guy to this story? See below enough said, I hate runaway breakouts, unless of course I am long them.

FAST 1 yr chart by Livevol

MY VIEW: There is a lot of good news in the stock and with expected sales growth of 16% in 2011 and the stock currently trading at about 30x the expected $2.25 in earnings this year I would say this is currently priced for perfection……with 4 days to expiration, this sort of recent price action, an earnings event, and a stock that appears to anticipating good news,  I will clearly take a  look on a slow day like today.

WAY TO PLAY:

TRADE:  [Speculative / Contrarian / Low Conviction]

FAST (stock Ref 67.70) Buy APR Put Spreads – BUY APR 65 / 60 Put Spread for .50

-Buy Apr 65 Put for .60 and

-Sell Apr 60 Put at .10

Break-Evens on Apr Expiration (Friday):

Upside: stock btwn 65 and 64.50 lose up to .50, stock above .65 and lose all .50

Downside: stock btwn 64.50 and 60 can make up to 4.50, stock below 60 and you make 4.50 or 6.5% of the underlying.