Exploring the Options Trade on AutoNation

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Sept. 13 (Bloomberg) -- In today's "Options Update," Bloomberg's Julie Hyman and Anshul Agarwal of Bay Crest Partners examine the options trade on Autonation in "On The Markets." They speak on Bloomberg Television's "Lunch Money."

Joining me as a member of baker as partners.

You have abolished play on this stock.

You are looking at the trendline.

It is trading trading near multi-year highs.


The stock is hitting multiyear highs.

That is a concern for an investor.

You also have to look at what the trend line has been over the last five years year the stock has never broken that trend line.

Now it has broken through on the upside, the resistance that the stock has had.

From a technical perspective.

Let's talk about the fundamental perspective.

If you look at the automakers, that market has been very strong.

We have seen auto sales pick up because of the replacement cycle.

People have old cars they need to replace.

Those numbers have been good.

As they gone through an auto dealer like autonation?

Yes, it technically has been that you have to understand that these auto dealers, they do not get as much limelight.

Ford and gm get most of the limelight.

When these dealers are able to do is they are able to adjust themselves to different economic cycles.

In order to get profits, they can play with their selling an agenda and expensive -- and expenses.

Now they are but a fitting from the lower cost base that they have.

Let's get to your slide.

It is sort of a three-leg kind of strategy.

What i am trying to do is i am looking at april options.

I want to buy a call spread in april.

I want to buy the 55-70 call spread.

Three dollars, $3.50. i want to sell the april 40 put.

The next cost is around $2.80, but it also exposes me to the downside.

I am really comfortable owning the stock 25% below from the current levels.

The stock would have to erase the entire gains for the year to get to that level.

That would be a good point for me.

Between 55 and 70, that his rear profit is maximized.

What happens if the stock languages between 40 and 55 -- what if the stock languishes between 40 and 55? the most would be a net premium of $2.80. but i have a nice 4-to-1 leverage.

Long-term, this is a good play.

Long-term bullish on automation.

This text has been automatically generated. It may not be 100% accurate.


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