New Trade HANS: I Am Washing my “HANS” of This Consumer Discretionary Name…Again

by Dan November 21, 2011 9:55 am • Commentary

New Thoughts: Fundamentally I have zero edge when it comes to this company, All I know is that the price action doesn’t make sense to me and given some of the weakness of late in some other once cult stocks like GMCR, NFLX , AMZN and CRM I want get short exposure to this stock again.

Technically the stock looks vulnerable sitting right on a massive trend-line that has seen the stock rise 70% ytd and only down about 8.5% from the all time highs made earlier in the month.


Now normally I don’t like to press down openings, but this stock shows unusual relative strength only down 2.4% this morning.  

TRADE: HANS (88.75) Bought Dec 85/80 Put Spread for 1.30

-Bought Dec 85 Put for 2.60

-Sold Dec 80 Put at 1.30

Break-Even On Dec Expiration:

Profits btwn 83.70 and 80.00 make up to 3.70 , max gain at 80 or below down about 8% make full 3.70

Losses btwn 83.70 and 85 lose up to 1.30 and lose all 1.30 85 or higher.

* as I always I used a limit order as the bid ask is wide in this name, got filled .10 inside the offer.

3rd Update Nov3rd 2011 at 1:40pm: HANS reports Q3 earnings tonight after the close.  The options market is implying about an 8.5% move vs the 4 qtr average move of about 5.5%.    Last week I sold half of my position for a 1.75 gain….now I am going to close out the other half at 2.10 with the stock at 89.15 (gain of .25 on the second half of the position).  I am closing the balance because at this point I have not particular insight whether the company will miss or beat and the purpose of the trade was to play overly positive sentiment….and it worked.  I see no reason to risk the remaining capital I have committed to the trade for something (earnings) that I have no edge as to what they will report.


2nd Update Oct 25th 2:44pm:  With the stock down 7.5% today at ~$85 without any news, I am going to sell half the spread I bought last week for 1.85 at 3.60 for a 1.75 gain, taking most of my cost off of the table….going to let the other half ride…..

Update Oct 20th 2011: This morning I started legging into a Put SPread in Nov in HANS…..  I Bought the Nov 85 put for 3.10 when stock was ~92 now with the stock around 91 I am selling the Nov 75 Put against it at 1.25….now I have the NOV 85/75 Put Spread on for 1.85 and that is my Max Loss……

TRADE: HANS (~$91.50) Bought Nov 85/75 Put Spread for 1.85

Bought Nov 85 Put for 3.10

Sold Nov 75 Put at 1.25

Break-Even On Nov Expiration:

Profits btwn 83.15 and 75 make up to 8.15 at 75 make full 8.15

Loses btwn 83.15 and 85 up to 1.85 and above 85 lose full 1.85 in premium….

2nd Update Oct 20th 2011: With the stock at 92.00 I am rolling this position out, I am buying the [private] NOV 85 Puts for 3.10…..Earnings will fall in Nov expiration….I think this stock will go the way of GMCR and I any chinks in the armor that arise from their earnings call could be the start of a fabulous trade…..I will look to leg into a put spread when this stocks starts coming down to earth……

Update Oct 4th 2011: I sold half of this spread at 1.75, paid 1.00 (read here)

Original Post Sept 29th 2011: I Am Washing my “HANS” of This Consumer Discretionary Name

Looking at the damage done today in consumer names today I am actively looking for those that haven’t broken yet…..This action is downright disgusting; LULU -5%, CMG -4%, COH -8%, TIF -9%, ANF -6% , GMCR -11%, AMZN -5%.  Others will certainly play catch up.  

HANS sticks out to me as a name that could see some downside in a market like this….Chart below shows the massive divergence between HANS and the SPX… something has to give here….

SPX vs HANS 1 yr chart from Bloomberg

TRADE: HANS $87.20 I just Bought the OCT 80/75 Put Spread for 1.00

-Bought 1 Oct 80 Put for 2.05

-Sold 1 Oct 75 Put at 1.05

Break-Even on OCT exp: 

Profits btwn 79 and 75 make up to 4.00, below 75 make 4…

Losses btwn 79 and 80 lose up to 1.00, above 80 lose 1.00

TRADE RATIONALE: This trade is not high conviction as I don;t have a great handle on the fundamentals, I know it trades at a rich valuation to it’s peers….but I guess the chart and its relative performance of late is enough for me to dedicate a small amount of $ to short term trade…..I am risking what I am willing to lose….Generally I don’t want to press shorts after a sell off like we have seen in the last couple days….but if we make a new closing low in the coming week, nothing will be spared and names like this should get destroyed as evidenced by the price action of some of its peers today.