In The Money with Fidelity Investments – LULU, WMT & TLT

by Dan June 10, 2020 5:48 pm • InTheMoney• Trade Ideas

Today on my weekly In The Money segment with Fidelity Investments we quickly discussed the outperformance of the Nasdaq vs the S&P 500 and the Russell 2000 and what that might mean at this stage of the rally off of the March lows. I also detailed two trade ideas in retail stocks, one for an investor looking to get long exposure in a retailer where changing consumer behavior during the pandemic might stick, even in an improving economy. And the other a near term bearish view in an apparel maker/retailer whose stock has had a 150% run off of the March lows and reports earnings tomorrow after the close. Lastly, we looked back at the two trade ideas that I detailed in last week’s show.

Watch by clicking below:

Here are my notes for the segment:

Friday’s surprise Jobs report caught a lot of investors off-sides, I suspect it is not nearly as good as the headline reads and the unemployment rate will remain double digits for at least the second half of the year…

Retailers like WMT should continue to benefit, and consumer discretionary items like LULU who has seen its stock rip could consolidate some gains.

Trade Idea #1:

Bullish Trade Idea WMT ($121.50) Buy Aug 125 – 135 call spread for 2.50

-Buy to open 1 Aug 125 call for 3.40
-Sell to open 1 Aug 135 call at 90 cents

Break-even on Aug expiration:
Profits of up to 7.50 between 127.50 and 135 with max gain of 7.50 above 135
Losses of up to 2.50 between 125 and 127.50 with max loss of 2.50 below 125

Rationale: risks less than 2% of the stock price for long exposure for most of the summer which also catches their next earnings release in mid-August.

Targeting a move back towards the April highs:



Trade Idea #2

LULU, company reports Q1 Thursday after the close, the options market is implying about a 9% one day move which is rich to its 4 qtr average of 5%.

The stock is up 36% on the year, up 145% from March lows. target breakout near $265

Bearish Trade Idea: LULU ($320) Buy July 310 – 270 put spread for $11

-Buy to open 1 July 310 put for 15
-Sell to open 1 July 270 put at 4

Break-even on July expiration:
Profits of up to 29 between 299 and 270 with max gain of 29 below 270
Losses of up to 11 between 299 and 310 with max loss of 11 above 310

Rationale: risk 3% of stock price to possibly make 9%


Review of last week’s trade ideas:

Last week I detailed a trade idea to gain exposure over the summer to interest rates taking another left lower, expressing this view via Long TLT:

Bullish Trade TLT ($159.50) Buy Aug 160 – 175 call spread for $3.50
-buy to open 1 Aug 160 call for 4.60
-Sell to open 1 Aug 175 call at 1.10

Now $160.50 as I write and call spread worth more than the $3.50 paid, it was lower earlier when I when we taped… let’s see if it can hold $160, but after last week’s dip I suspect it might be trying to create a new trading range above $160


I also detailed a bullish trade idea in GE at a time when investors (traders) appear to be going after beaten up low dollar price stocks. GE traded as high as $8.50 this week, causing the July 8 call that could have been bought last week for 25 cents when the stock was $7.20 when we taped last Wednesday. Now with the stock $7.75, the July 8 call is worth 50 cents. One might consider taking the short-term profit, selling half, or sell a higher strike call to reduce premium at risk and lock in some gains by creating a vertical cal spread.