On Thursday, DRI – whose brands include Olive Garden, Longhorn Steakhouse and The Capital Grille – reported profits that exceeded expectations for sales and profits. The company also announced that it would more than double its dividend along with a $ 500 million share buyback program. The news was warmly welcomed by the street, which showered the dine-in chain conglomerate with a series of target price increases that went as high as $ 165 (the stock closed at $ 149 on Friday). The stock gained more than 11% in the two days following the earnings news and hit another all-time high on Friday.
To say DRI is in rally mode would be a gross understatement. Since hitting its low point last April, the stock has risen 245%. DRI has already gained 25% this year. The rally was largely around the DRI’s 20-day moving average, with the 50-day moving average providing support for pullbacks. Given the solid fundamentals and the recent surge in sales in the same store, there is reason to believe that the rally should continue as customers return to DRI’s various dining rooms.
If you’re okay with the DRI rally having legs, consider the following trade, which depends on the stock staying above $ 145 by eight weeks’ time to expire.
Buy to open DRI 21May21 140 Put (DRI210521P140)
Sale to open DRI 21Mai21 145 Put (DRI210521P145) for $ 1.90 credit (sale of a vertical)
This loan is $ 0.05 below the midpoint of the options spread when DRI was trading just below $ 149. If the stock doesn’t recover quickly from here, you should be able to get close to that amount.
Your commission on this trade is only $ 1.30 per spread. Each spread would then be $ 188.70. This trade reduces your purchasing power by $ 500 and brings your investment to $ 311.30 ($ 500 – $ 188.70). If the DRI closes above $ 145 on May 21, both options will expire worthless and your return on the spread will be 61% ($ 188.70 / $ 311.30).
As with all investments, you should only trade options with money that you can really afford to lose.
Have fun trading,
Tags: Bearish Options Strategies, Bullish Options Strategies, Calls, Darden Restaurrants, DRI, Profit Notification, Monthly Options, Portfolio, Profit, Profits, Puts, Risk, Vertical Put Spread, Weekly Options
This entry was posted on Monday March 29th, 2021 at 1:23 PM and is filed under Profit Reporting Strategy, Last Minute Strategy, Lazy Way Strategy, Monthly Options, Stock Option Trading Idea of the Week, Weekly Options.