This is our third and final adjustment on our W Trade. These are both credit spreads of put and call legs. See the video for all the details on this short-term trade.
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The success of Netflix is undeniable. But, with success comes competition, including direct attacks on their model from much larger firms in the entertainment space. The ability of Netflix to beat quarterly expectations does not speak to the long-term challenges the company faces. Jim and Scott target this streaming giant as stiffer competition and slower growth will send its stock price lower. Also, we have a second adjustment trade for our SCHW position today.
The results of the economic shutdown have been devastating for many businesses, both large and small. In particular, the combination of pandemic fears, travel restrictions and greatly reduced spending has hit the hotel sector worse than almost any other industry. Jim and Scott target this iconic hotel brand as continued struggles with reduced business travel and consumer spending will negatively impact vacancy rates and put extreme downward pressure on its stock price.
The wishful thinking of pent-up demand in the travel and leisure industry is running headlong into the reality of a slow recovery, even with the pandemic possibly in the rear-view mirror. Consumer behavior for discretionary spending has taken a hit in the past few years along with economic distress. Jim and Dan revisit put options on this leading cruise liner as reduced capacity and increased financing costs will send its stock price on a downward trend.
Higher inflation and supply chain disruptions create higher costs for many retailers, affecting both bricks-and-mortar and ecommerce venues equally. Jim and Dan focus on this online retailer giant as higher costs, slower growth and increased competition indicate a tougher environment that’s inconsistent with its current valuation. As a result, put options are the best way to profit from a coming fall in its share price.
With a new wave of COVID spreading, the U.S. economy is slowing and pandemic-related lockdowns and travel restrictions are returning to American life. This will hurt automobile travel and automobile sales. Jim and Dan target a leading automobile manufacturer that faces an overvalued stock price, a temporary production shut-down, the ongoing effects of the pandemic and a future bet on EVs that may backfire. These headwinds will depress its stock price in the coming weeks.
