October 1, 2018

Stitch Fix Looks To Hold Steady For A Bit

Stitch Fix, Inc. sells a range of apparel, shoes, and accessories through its Website and mobile app in the United States.  We evaluated a potential earnings signal and based on the technical levels in this chart and the expected move that the options market was predicting, we entered an order to sell an Iron Condor.  Well – that certainly sounds complicated but it really isn’t. An iron condor is just a combination of a call spread and a put spread. In this instance, we are trying to sell both and collect a credit.  

The goal?  Since we are selling both spreads, ideally we want the stock to remain between the two short strikes, so we are looking for the stock to remain somewhat rangebound.  The expected range of the stock based on the options market is approximately $39.00 – $52.00, which is the recent low to high over the past month. As always, our risk is completely identified and limited:  If we sell this for a $1.00 credit, our maximum risk is also just $1.00, as the width of each spread is $2.00.

 

about the author:

Scott Bauer

A respected market commentator seen on Bloomberg, Fox Business, CNBC and other major financial networks, Scott Bauer has 25 plus years of professional equity and index options experience at the Chicago Board Options Exchange (CBOE) and Chicago Mercantile Exchange (CME) and as a Vice-President/trader for Goldman Sachs. Scott graduated with Honors from the University of Illinois Business School and has taught classes both at his alma mater and at the CBOE.

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