Santa Claus is coming to town very soon, and already we’ve seen the makings of his early visit down the chimney at the corner of Wall and Broad.
The so-called Santa Claus rally really kicked into high gear after Black Friday, where shoppers spent a record $52.4 billion across the long Thanksgiving holiday weekend. That number was up 16.4% from 2010. Cyber Monday also set a record, with online sales increasing 33% over the prior year.
But forget presents. While everyone else is busy spending money on clothes and trinkets and electronics this season, as options traders, what we really want is for Kris Kringle to bring us a sack of profits!
You could always put that on your wish list and send it to the North Pole. Or you can create a little magic of your own instead with some holiday-themed trades that come in the right size and style for any account.
With all of this holiday cheer, it’s possible to buy call options on the best retailers and make out like a greedy elf. However, not all retailers have been nice this year. Some have been downright naughty. Fortunately, options players can profit from both naughty and nice retailers with the following options trades.
Best of all, you won’t want to exchange these returns!
Let’s look at the next page to see who makes the “naughty” list …
These days, it’s tougher to identify retail losers than it is to pick winners, but there are still plenty of retailers that haven’t seen jolly old Saint Nick. One such company is perennially troubled Sears Holdings (NASDAQ:SHLD).
The company has been plagued by slow sales and stiff competition from rival retailers like Target (NYSE:TGT) and Dillard’s (NYSE:DDS). Younger consumers also widely see this as an old-school, unhip place to shop.
Despite the holiday rush at the malls, Sears is unlikely to see a spike in sales capable of sending the shares higher. Options players should look at the SHLD Jan 57.50 Puts as a profitable holiday present this season.
Another formerly fantastic retailer that’s not likely to see any holiday cheer this year is Gap Inc. (NYSE:GPS). The company’s Black Friday sales were disappointing, and total same-store sales for November came in 5% below last year’s number. In fact, Gap’s same-store sales have been on a descent for the last five months … a decline that includes sales at its lower-end Old Navy chain.
With all of the choices open to shoppers, it seems as though Gap is getting passed over. But options players shouldn’t pass on the GPS Jan 17.50 Puts, as it could stuff your stockings with some nice upside.
Check out the next page for the names on our “nice” list…
The universe of nice holiday retailer options is a lot bigger this year, and that’s chiefly due to the aforementioned bump in sales we’ve seen so far. It’s also due to the bullish climate in stocks over the past couple of weeks. Still, it’s tricky narrowing down the best options plays for stocks embracing the holiday spirit.
One stock that comes near the top of the holiday list is Amazon.com (NASDAQ:AMZN). The premier online retailer continues to be a game-changer, and its new Kindle Fire sales are, well, en fuego. Options players looking to add some warmth to this winter season should wrap up the AMZN Jan 195 Calls.
If you want to take advantage of the general bullish cheer that Santa is likely to bring this year, then check out the SPDR S&P Retail ETF (NYSE:XRT). This Exchange-Traded Fund holds many of the biggest and best retailers out there, so if the sector trends higher this holiday season, buying calls on this ETF could bring investors a lot of yuletide cheer.
Check out the XRT Jan 55 Calls for the ultimate bullish play in this hustling-and-bustling sector. And don’t forget to leave out some cookies and milk (or other treats and spirits you think the big guy would like) to say thanks for the holiday gains that don’t end up on your waist!
Disclosure: At the time of publication, Jim Woods held no positions in any of the stocks mentioned in this article.