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Lululemon recorded one of the best performances of the Nasdaq 100, up more than 85% last year.
The athleisure retailer hit a record $ 164.79 in October. It is currently at 13% of this summit.
"I like the way the stock has recovered after this report on mediocre earnings [in December], "said Gordon. Just like a shot after this double bottom at $ 110, we came here very suddenly. We have fallen into what we call a "bullish flag", which is just a short-term consolidation, just a little respite when the buyers pull back, let a profit part enter. "
Since their low at around $ 110 in December, Lululemon's shares have risen by 31%. Since late January, stocks have consolidated in the range of $ 144 to $ 152.
Gordon has a system of options to take advantage of the expected movement before Lululemon publishes his results on March 26th.
"We will move to these options of March 22," he said. "This transaction is designed to make you lose money before profits, and as I was saying, the implied volatility will increase as we look at this March report, which means that the value of the transaction will be higher. Longer, deeper option We will need $ 155, which will help us The $ 165 we miss is going to work against us as implied volatility increases because it is further away from the money . "
In simple terms, Gordon buys the call at $ 155 and sells it at $ 165, betting on a move greater than $ 160.
"We are going to pay $ 2.74 for a spread risk of $ 10, which means we are going to risk $ 224 to potentially win $ 726. Certainly a good risk / return ratio," he said.
To manage the risk, Gordon also puts a stop-loss if the trade of 2.74 dollars sees a disadvantage of 50% to about 1.37 dollars.
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