Weekend Trader Series
June 2, 2024
Open Positions Update
- Please extend the scheduled time-stop date on the Maplebear (CART) July 19, 2024, 38-strike put to Monday, June 17.
The following is this week's recommendation:
BJ's Wholesale Club (BJ)Place a limit order to buy the BJ's Wholesale Club (BJ) August 16, 2024 85-strike call at a limit price within range of the current market asked price when you place your order. This option was bid at $5.20 and offered at $7.30 at the close on Friday, May 31. If the spread remains wide, try to enter at the mid-point of the bid-ask spread, or slightly below the mid-point at the time you place your order. BJ closed at $88.07 on Friday, May 31.Do not attempt to enter this position after Monday's close.Please use the following guidelines to manage the position:- Exit the position if the option is at a 100% gain from your entry price.
- If the option has not reached its target profit by 3:00 p.m. Eastern time on Monday, June 24, close the position.
- If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.
BJ's Wholesale Club (BJ) stock broke out above $80 after the retailer’s earnings report, a level that is also the site of 2022 highs. Follow-through buying then pushed the shares above $85, or five times their initial public offering (IPO) price of $17 back in 2017. Now looks like an excellent time to bet on a move higher, given its mild pullback and relative strength amid this week’s broad-market selloff.
Despite being fresh off all-time highs, analysts are bearish toward the stock, with 10 of 19 in coverage maintaining a “hold” or worse rating. This leaves ample room for bull notes, which would generate additional tailwinds. The security could also benefit from a short squeeze, with short interest up 370% since the end of 2022 and accounting for a whopping 44.5% of its available float.
It’s also worth noting that implied volatility (IV) of 23% for the shares is below 63-day historical volatility (HV) of 34%. Our recommended August 85 call has a leverage ratio of 8.9 and will double on a 11.1% pop in the underlying equity.
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