About a month ago we checked in on Shake Shake (SHAK) after the stock held long term support. Our thinking at the time was that a follow through to the upside was likely, and the stock would have an outside chance at reaching the high 30’s once again. Here was the trade idea, from Sept 13th:
SHAK (31.50) Buy the Nov 32.5/37.5 call spread for 1.10
- Buy 1 Nov 32.5 call for 1.35
- Sell 1 Nov 37.50 call at .25
SHAK has trended higher over the past month, and with earnings set for next week it makes sense to check back in on this trade.
With the stock 35.75 this trade is now worth 2.90, a profit of 1.80 from the entry. Intrinsically it is worth 3.25 here, so it gets a little more profitable each day. However, earnings will be a binary event and the trade could be worth up to 5, but could also be worthless if the stock sells off and close below 32.50 on Nov expiration. So taking profits before the event makes sense.
Sell to close the SHAK (35.75) Nov 32.5/37.5 call spread at 2.90 (for a 1.80 profit)
For those looking to use those profits to target even higher, it makes sense to go for as little risk as possible as to not roll the dice on the booked profits. The Nov 36/38/40 call fly is about .40. That’s a nice way to book 1.40 in profits while leaving something on for a move back towards this Summer’s highs in the stock. It can make up to an additional 1.60 if the stock is 38 on Nov expiration and is dollar cheap versus the current profits.