Last Friday we previewed United Parcel Service’s (UPS) Q4 earnings. The results are out this morning and the stock is down 6.5%:
UPS reported fourth-quarter earnings $1.63 per share on revenue $16.93 billion. Analysts expected UPS to post $1.69 per share on revenue of $17 billion, according to a consensus estimate from Thomson Reuters.
We detailed a bearish trade in February that targeted this earnings event. Here was the trade:
UPS ($117.75) Buy Feb 118 /110 put spread for $2
- Buy to open 1 Feb 118 put for 2.25
- Sell to open 1 Feb 110 put at .25 cents
With the stock $109 and below our short put strike (Feb 110) this trade is now worth 7.40 versus the $2.00 paid. The maximum this can be worth is 8.00, but there’s almost 3 weeks left until expiration so it’s risking those profits to make just .60 more. For that reason it’s worth taking the profits on this gap lower:
ACTION – Sold to close the UPS ($109) Feb 118/110 Put spread at 7.40 for a 5.40 profit.
- – Sold to close 1 Feb 118 put at 9.90
- – Buy to close 1 Feb 110 put for 2.50