Every baby was thrown out with the bathwater, and sharp traders smelled blood and came out to bottom-feed on underpriced retail stocks.
Of the notable trades we saw cross the tape, Dick’s Sporting Goods DKS – NYSE was targeted as being undervalued with the purchase of 5,000 DKS March 57.5 calls for $2.55 apiece.
With a capital outlay of just under $1.3 million in option premium and a break-even price at expiration of $60.05, DKS has to increase 10.3% for this trade to pay off.
The technical setup for DKS looks promising, as the stock easily held its own lows from December on a day when just about every other name in this beaten-up sector put in new lows. If DKS can shake off the ills of its retail peers and recover, this trade will profit $500,000 for every $1 above $60.05.
Source: Bottarelli Research