Booking gains on Amazon (AMZN) calls

Several months ago, we added Amazon (AMZN) shares to the Tematica Investing Select List, and the calendar shifting from Back to School spending to gearing up for the 4Q 2016 holidays and related shopping we added the Amazon (AMZN) January 2017 $800 calls (AMZN170120C00800000) to the Tematica Pro Select List.

Given the strong run up in that call position, up 75.1% since we issued a Buy on it just two weeks ago and because we are about to enter 3Q 2016 earnings season, we are being prudent investors and trimming the AMZN call position back.

• After you receive this alert we will sell half the Amazon (AMZN) January 2017 $800 calls (AMZN170120C00800000) position, keeping the other half of the original position in play to capture additional gains to be had as we move deeper into the holiday shopping season. 
• As we make this trade, we will also boost our stop loss on the remaining Amazon calls to $50 from $35, which should lock in a return at least a modest return given our $43.10 entry price. 

Putting that AMZN profit to use in Costco Wholesale (COST) calls

Last week we brought Cash-strapped Consumer company, Costco Wholesale (COST) back to the Tematica Select List. We continue to see Costco winning consumer wallet share as people look to stretch those shopping dollars for presents, food and drink, candy, decorations and more as they get ready for Halloween, Thanksgiving, Christmas, New Year’s and other year-end holidays. Helping boost the company’s prospects, it expects to open several more of its warehouse stores before the end of 2016, which should help drive incremental membership fees. As we’ve pointed out, those Costco membership fees are a big contributor to the company’s overall operating profit.
Even though Costco continues to improve its online offering, which argues the case for some Connected Society tailwind this holiday shopping season, we see Costco as the holiday shopping ying to Amazon’s yang. As such we are making the following move:

• Issuing a Buy on the Costco Wholesale (COST) January 2017 $170 calls (COST170120C00170000) that closed last night at $0.43. We are opting for the January calls in order to capture as much of the 2016 holiday shopping season as possible, just like we did with the Amazon calls. 
• We would look to add these Costco calls up to $0.54, and because it is a new recommendation with a time horizon that spans several months we are not issuing a protective stop loss setting at this time. We’d prefer to use any weakness to scale into the position size. 

Doubling down on Under Armour (UA) January 2017 calls 

We will also use part of the Amazon gains to scale into our Under Armour (UA) January 2017 $50 calls (UA170120C00050000) that closed last night at 0.18.Yep, on the back of bullish comments from Dick’s Sporting Goods (DKS), Foot Locker (FL), and Finish Line (FINL) over UA’s expanding footwear business, we’re using the 49% drop over the last week to dramatically improve the cost basis for this trade.

With the latest NBA season kicking off and the newest line of Curry branded footwear as well as new running shoe  models hitting shelves, we see further share gains ahead for UA. Nike’s (NKE) recent quarterly results confirmed UA share gains in Europe, and let’s remember that before the end of 2016 Kohl’s (KSS) will be stocking UA gear in all its locations. As we move deeper into the holiday shopping, we’ll use any additional weakness to improve the position’s cost basis; as such, we are not issuing a protective stop loss recommendation at this time.

Get the Consumer Discretionary Select SPDR calls while you can

Despite the jump in our Amazon (AMZN) calls we discussed above, the Consumer Discretionary Select Sector SPDR ETF (XLY) January 2017 $85 calls (XLY170120C00085000) have moved far less by comparison. With last night’s close, those calls were up 8.5% over the last two weeks even though Amazon is the largest holding in the underlying ETF. As you can imagine, we see this as a cheap way to play not only Amazon, but also Disney (DIS), Starbucks (SBUX), TJX Companies (TJX) and many others this holiday shopping season.

• We continue to rate these XLY calls a Buy at current levels. 
• We would look to add the calls up to $0.60, but given wide swings in some ETF call options we will continue to hold off adding a protective stop loss for now. 

SUMMARY OF ACTIONS FROM THIS POST:

• Selling half of our Amazon (AMZN) January 2017 $800 calls (AMZN170120C00800000), which are up 75.1% since we issued a Buy on them just two weeks ag and boosting our stop loss from $35 up to $50.
• Issuing a Buy on Costco Wholesale (COST) January 2017 $170 calls (COST170120C00170000) that closed last night at $0.43. We would buy these calls up to $0.54, but are holding off with a stop-loss at this time.
• Scale into our Under Armour (UA) January 2017 $50 calls (UA170120C00050000) that closed last night at 0.18, using the 49% drop over the last week to dramatically improve the cost basis for this trade. 
• While we are up modestly in the Consumer Discretionary Select Sector SPDR ETF (XLY) January 2017 $85 calls (XLY170120C00085000), we continue to rate them a Buy at current levels. We would look to add the calls up to $0.60, but given wide swings, we will hold off before adding a protective stop loss.