Best Stock on the Market

Put Spread on SCSS on 1/30/2013

Select Comfort Corporation (SCSS) is a bed manufacturer and retailer. The Company designs, manufactures, markets and distributes the SLEEP NUMBER bed and other sleep-related products. The Sleep Number bed features DualAir technology, which allows couples to adjust each side of the mattress to his or her level of firmness. The Company offers Sleep Number beds in three series, which includes Classic Series, Performance Series and Innovation Series. The Sleep Number bed series are available through its the United States Company-Controlled distribution channel. The Company's SLEEP NUMBER Bedding Collection offers a line of products. In January 2013, the Company acquired Comfortaire Corp.


Stockwinners is bearish on this name for the following reasons :

1. The company missed earnings estimates and provided  downbeat guidance in its quarterly report.

2. The maker of the Sleep Number bed delivered profits of just $0.22 per share, well below the $0.32 Wall Street had expected, and down from $0.27 a year ago.

Shares last traded at  $21.87

Trade: Buy 1 March 22.5/20 put spread for less than $1

  • Buy 1 Put $22.5 for less than 1.45
  • Sell 1 Put $20 for less than .45

Breakeven & profit/loss analysis

  • Breakeven at  $21.5 by March expiration
  • Profit Up to $1.5 Between 21.5 to 20 , Max profit $1.5 below 20
  • Lose up to $1 between $21.50 to $22.5, Max loss $1 Above $22.5

The Payoff table is presented below :

Trade

  • Buy 1 March $22.50 Put at $1.45
  • Sell 1 March $20.00 Put at $0.45
  • For a net debit of $1.00

Profit/Loss Analysis

  • Maximum profit is $150.00 at strike of $20.00
  • Maximum loss is ($100.00) at strike of $23.00

Closing Summary

  • Sold 1 March $22.50 Put at $2.10
  • Bought 1 March $20.00 Put at $0.50

Position closed on 2/20/2013 at price of $1.60 with a 60.00% gain in 21 days.

Updates

2/20/2013 2:57:35 PM

We are closing the SCSS option trade. We are selling the March $22.5 Put at $2.10, and buy March $20 put for $0.50. The net is $1.60 gain vs. initial investment of $1.00. SCSS last traded at $22.49

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