Footwear maker Deckers Outdoor Corp (DECK) posted a higher-than-expected fourth-quarter profit, helped by higher sales of its premium UGG brand, but forecast 2009 profit below market estimates, sending its shares down almost 10 percent. With this gap-down, I am expecting to have My DECK puts to yield about 100% for one day holding. Here is what I shared with OPN Bonus Trade post-
Contrary to what street thinks, I am thinking DECK will have to convince they are different. My hunch is that it will gap down. I purchased a few Mar 45 Puts contracts for 1.65, and I know clearly that I may lose all of this (This is speculative trade)
Deckers Outdoor expects 2009 earnings to be flat at $7.27 a share, or lower, on a non-GAAP basis. Analysts were looking at $8.05 a share. The company also expects first-quarter 2009 earnings to fall about 28 percent on higher costs related to new retail stores, warehouse operations and international infrastructure.
Earnings play are very speculative in nature and best chances are 50/50, we can try to improve our chances by detailed analysis but still it is 50/50. Hence, should you play such speculative trades, I encourage only to allocate 2-3% of your capital, and the only one that you are willing to lose to take this chance.
Waiting for makets to give its verdict to DECK when it opens,
Profitable Trading, OP