Trade of the Day: Advance Auto Parts, Inc. (AAP)

The "Amazon effect" could be a serious threat to AAP

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Last month’s earnings from Advance Auto Parts, Inc. (NYSE:AAP) were good, with one important soft spot — same-store sales. However, the stock was able to claw its way back into the gap until Tuesday. We like a bearish entry here to take advantage of a “dead cat bounce” triggered by a report from Morgan Stanley (NYSE:MS) that, Inc. (NASDAQ:AMZN) poses a significant threat to auto parts retailers. We couldn’t agree more.

We wouldn’t compare auto parts retailers to office supply stores completely, but the threat is very similar and is gaining momentum. We expect AAP to drop back to its earnings reaction price in the near term.

‘Buy to open’ the AAP October 90 Puts (AAP171020P00090000) for a maximum price of $1.75.

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