Long trade: SHLD- Sears holdings

With SHLD price getting close to 30$ I think it is a good time to describe a long thesis for SHLD. This 4 minutes video summarize the idea pretty well.

$SHLD Chart
$SHLD Chart

To summarize:

1. SHLD will not go bankrupt. It still has large amounts of cash.

2. SHLD has very committed long holders.

3. On the other had there is a huge short interest on this stock.

Here is update data from Finviz. Please note the large institutional stake VS the large short stake.

Committed longs VS Short sellers in SHLD
Committed longs VS Short sellers in SHLD

We can see that Insiders + inst hold almost 78%. Short is almost 21%.

The idea is that any positive news will have to force the short sellers to cover their position, and since the committed longs will not sell the stock at current price levels, the short sellers will have to  buy all available float. This will cause huge increase in price.

How to play it:

I will try to play this with positive Theta trades – mainly naked puts and bull put spreads. With the price close to 30 I feel comfortable to start placing the positions. Especially since the IV is high:

Shld table
Shld table

 

Find more trades like this here: Option Samurai

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