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Call Spread on KORS on 8/24/2012

Michael Kors dresses the stars, both real and imagined. The company designs, distributes, and sells high-fashion apparel, footwear, and accessories for men and women. It has expanded its product portfolio through the years by inking several licensing agreements, such as watches with Fossil, eyewear with Marchon, and fragrance with Estée Lauder. The firm's collections include three brands -- Michael Kors, MICHAEL Michael Kors, and KORS Michael Kors. Mr. Kors himself owns about 12% of the company while Sportswear Holdings, the holding company owned by fashion investors Silas Chou and Lawrence Stroll, owns 50%. Parent company Michael Kors Holdings filed to go public in late 2011.


Stockwinners is Bullish on this name for the following reasons:

  1. Michael Kors has a new active bullish pattern, levels to watch -There is an active bullish pennant on the daily chart that triggered today when price broke out above the top of the pattern at the $52.50 area. Upside potential for the pennant, if it remains active and completes, is to the $57.50 to $58 area. The pattern would no longer be active and likely no longer valid on a move below $52.50.
  2. KORS fiscal first-quarter earnings nearly tripled, as the fast-growing fashion company saw double-digit same-store sales gains in both North America and Europe and also recorded a rise in licensing revenue.

TRADE: BUY 1 SEPT $55/$60 Call spread for less than $1.25

  • Buy  1 SEPT $55 Call for $1.80
  • Sell  1 SEPT $60 Call for $0.55

Breakeven & Profit/Loss analysis

  • Breakeven on $56.25 by Sept expiration
  • Profit up to $3.75 between $56.25 to $60 , max profit $3.27 above $60
  • Lose up to $1.25 between $56.25 to $55 , maxx loss $1.25 below $55

The payoff table is presented below:

Trade

  • Buy 1 September $55.00 Call at $1.80
  • Sell 1 September $60.00 Call at $0.55
  • For a net debit of $1.25

Profit/Loss Analysis

  • Breakeven at $56.25
  • Maximum profit is $375.00 at strike of $60.00
  • Maximum loss is ($125.00) at strike of $55.00

Closing Summary

  • Sold 1 September $55.00 Call at $2.10
  • Bought 1 September $60.00 Call at $0.35

Position closed on 9/6/2012 at price of $1.75 with a 40.00% gain in 13 days.

Updates

9/6/2012 1:06:04 PM

Stockwinners is happy with the gains and is closing out this position . Please adjust your stop loss if you still want to stay long.

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