The "60 Minutes" piece on Lumber Liquidators (LL) was very negative, as expected.
Premarket pricing looks to be around $39, down about $13 from Friday's close, which had been up a bit from Thursday when the news of this story first broke.
I'm sticking with my short puts I wrote about on Friday for Real Money Pro, for the moment.
As I wrote:
I passed on buying stock outright, but I did take advantage of its depressed price and increased volatility by selling long-term puts at juicy premiums.
Speculators paid as much as $5.86 and $8.50 on Thursday for LL Jan. 2017 $35 and $40 puts, respectively. Writing the more conservative $35 strike only commits to worst-case scenario buying at a net price of $29.14 ($35 strike, $5.86 put premium).
The ultra-low break-even price on the $35 puts provides a better than 41% margin of safety from the trade inception price of $49.75. Barring other outrageously bad news, that should be more than enough cushion for those willing to shoulder the near-term headline risk.
The expirations extend all the way out to 2017 and have break-evens that remain well below current prices, even after this morning's selloff. There is plenty of time for a stabilization or rebound once the headline shock wears off.
American Express (AXP) looked pretty bad a week earlier after falling on bad news to $77.12 from a yearly high of $96.24. A few days later AXP is starting the week at $81.75, in the absence of any good news.
LL is debt free and profitable.
Unless the news on LL worsens quite a bit, the stock is likely near a bottom. Lumber Liquidators is down from a 52-week high of $110.52 already.