27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.
On December 5, 2013, Bon-Ton Stores (NASDAQ: BONT) closed at $17.51.
That day, Benzinga published an article, "3 Reasons to Short Bon-Ton Stores." Bon-Ton Department Stores is now trading around $12.40 a share. It is off by well over 30 percent for the last month of market action.
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The reasons cited in the article are just as valid today, if not more so for investors looking to profit from establishing a short position on a stock.
Overall, the main factor to short Bon-Ton Department Stores is that it is a classic value trap. Due to the poor performance of the store, the price-to-sales ratio is 0.08. That means that every dollar of sales is going for only $0.08 in the stock price. To some, that screams buy.
As pointed out in the December 5 article, the best way to profit would be to cry out "go short" to your broker, and then run for cover from the plunging stock price.
Bon-Ton Stores has way too much debt, way too little cash, and way, way too little in the way of customers its merchandise. Like other department stores in the retail sector such as JC Penney (NYSE: JCP) and Sears Holding (NASDAQ: SHLD), it is a value trap, not a value play.
When the article was published back in December by Benzinga, Bon-Ton Stores was up 30 percent for the month. It had just had its target price lifted from $13.50 to $16 by Telsey Advisory Group.
The mean analyst target price for Bon-Ton Department Stores is still $15.50 over the next year. But the short float is over 25%, which is where the money is being made; and should be well into the future.27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.