(12-03-2020, 01:31 PM)kblake Wrote: How are KSS, JWN, CAKE, SIX, CCL and the rest of these names keep skyrocketing lolMy thoughts are it's tricky shorting Momo. We'd probably agree SIX is actually worth $10 right now. If things go very well for them it's perhaps a $30 stock in a year. They are in a deep hole. But they are about $30 now, so why not $50? It helps a lot if the overall market pulls back at some point. There is little assurance of that in just a few months. Same deal with most of the others you mentioned.
I'm really thinking of buying puts in companies like this. Maybe out to FeB?
Here's my question. Any companies you see playing the short side? I may wait a bit to see if they move higher and then play the downside.
Thoughts?
Have you ever traded call spreads on the short side? My win rate has been FAR better, and the payoff is still decent. I am going to make up numbers here but something like this. SIX is at 32. You SELL calls strike 37.50 and get paid the premium. You BUY an equal number (or nearly so), of strike 40 calls. Stays below $37.50 you keep the net premiums. Your break even is $37.50 plus the amount of net premiums received. Say it all goes bad. You stop losing money at 40, no matter how high it flies. Those numbers may not work at all for SIX right now.
This works a lot better when the VIX is a little higher. The closer you crowd the current price, the higher the premiums. You can also kick the protective calls you have to buy a little farther out. I actually prefer to do it with more boring stocks that have just out run their trading range a bit too much. I did it six times in a row with DE and got bit on the last attempt. It's broken out now and the story changed so it's not a candidate anymore. Those Momo stiocks could work but you gotta keep the protection in tighter and that trims the profits.
Just buying puts is your best shot at a bigger gain, but you'll lose the bet very frequently, no matter how good it looks. On a side note, if you are going to short a cruise line don't tangle with Norwegian. They are the Delta or Southwest in their world. CCL is an easier target. Plus the kids will run it up for you now and then. I think the best shorting opportunities may be when they are back in BIZ a few months. They are going to choke hard on those damaged balance sheets once the pent up demand cooks off in half a season.