In late August (and all the time really) we discussed beaten up retailers and which might have a good defense strategy vs Amazon. Williams Sonoma stuck out as an interesting example. From August 23rd:
it’s getting hard to tell who can survive the retail apocalypse but Williams Sonoma has that barbell strategy potential, especially with their status as a registry destination, which happens largely online. And again, no debt, and $5b in sales.
WSM was due to report fiscal Q2 earnings that day and we detailed a defined risk/counter-trend bullish trade idea. Here’s how it looked:
WSM (43.05) Buy the Sept 47.5 / Nov 45 vertical call calendar for 1.60
- Sell 1 Sept 47.5 call at .55
- Buy 1 Nov 45 call for 2.15
WSM was higher on the event and in recent days has followed through and is above our September short strike. With the stock now 48.85, the trade is now worth 3.05 vs the initial 1.60 at risk, so nearly a double. It looks like it found some resistance around 50 here but unless the stock pulls back to below 47.50 and the Sept calls expire worthless the trade is about done with its potential profits. (It’s short about 9 deltas here). Therefore, from a trade management standpoint it probably makes sense to simply close the trade at a nice profit and look for other opportunities.