Coach, Inc (COH) is a marketer of handbags and accessories for men and women. The company offers bags, footwear, jewelry, watches and fragrances. The company’s stock is currently trading around $53.50 in a 52 week range of $45.87-$61.94. The stock has been weak this year, under performing the broader market, selling off 3.5% year to date. The stock is also lower by over 4% in the past 12 months. COH is set to report their quarterly earnings tomorrow before the market opens. The stock has been relatively weak on earnings selling off on earnings day 5 of the past 8 quarters. The stock has an average earnings day move of around 9.0%. Shares of COH are also breaking the Ichimoku Cloud to the downside, a sign that there could be significant downside in the near future. This major technical indicator coupled with historical weakness in COH means we will be looking to get short into earnings. With the options market implying a move of $4.45 by Friday’s expiration we can calculate a downside target of $49.05. Using this target we can now set up a trade.
Trade: Buying the COH Oct 25th Weekly50-49 Put Spread for $0.30
Risk: $30 per 1 lot
Reward: $70 per 1 lot
Breakeven: $49.70
