A Second Opportunity In A Familiar Name
We’re revisiting Calumet (CLMT 0.00%↑), a previous winner featured among Portfolio Armor’s Top Names last night. Its renewable-fuels expansion and debt reduction give us a fresh reason to consider it.
A company can appear on our system’s Top Names repeatedly as its outlook and market conditions change. We review the current business case, technical setup and options pricing each time. That process has produced sequential, profitable trades in the same companies, on more than one occasion.
The Record Behind The Repeat Trades
Since we started our Substack in December of 2022, we’ve been presenting our Top Ten names to subscribers each week. Those are the names our system estimates will have the highest potential returns over the next six months. So far, we have results for 173 completed Top Names cohorts. Over the next six months, they returned 18%, on average, versus 9.91% for the SPDR S&P 500 Trust ETF (SPY 0.00%↑).
We use our Top Names as a source of ideas for our options trades. Below are examples of two separate winning trades we had in the same stock this year, trades we entered when it appeared and reappeared in our top ten names. Our Start Here overview links to the public record of every completed trade. The examples below show gross options returns on original maximum risk, before fees.
Two Separate Lumentum Winners
Lumentum Holdings (LITE 0.00%↑) illustrates the repeat-opportunity approach. Our January 14th Top Names trade closed on April 1st for a 194% gain on its original $710 maximum risk. Here’s the original entry:
The original opening limit was $2.50; our actual fill was $2.10. We then closed the put spread at a $0.10 debit and the call spread at a $16.00 credit:
Lumentum returned to the list later that month. We entered a new trade on April 24th and exited on May 7th for a 138% gain on $1,075 of original maximum risk. The first position had closed before the second opened.
The trade filled at the $10.75 limit and closed at a $25.61 credit:
Back To Calumet
Our May 1st Calumet trade also came from Top Names. We closed its put spread in July and exited the remaining call diagonal on July 20th, earning $343, or 49.7%, on $690 of original maximum risk.
The original $2.00 maximum debit filled at $1.90. The following card records both closing components:
Calumet makes specialty products and renewable fuels. In its second-quarter results, it reported $175.2 million of adjusted EBITDA with tax attributes, completed the first phase of its MaxSAF 150 expansion and highlighted $115 million of debt retirement in July.
On October 15th, it announced another $150 million redemption for October 25th. Management expects its recent debt-reduction actions, including this announced redemption, to reduce annual interest expense by approximately $26 million.
Cash generation and financing still need attention: Calumet posted a $95.9 million second-quarter GAAP loss, and total debt stood at about $2.26 billion at June 30th. Its next earnings report on November 6th will provide another check on operating progress.
For this re-entry, we’re using a different options structure aimed at greater participation in a strong rally. The new position has its own risk and timing; its entry instructions and management plan are below for paid subscribers.
New to our alerts? Start here for an overview of our approach:
Today’s Top Names Trade
Theme: Fuel output and debt cuts support recovery.
RSI: 50; Chartmill Technical Rating: 9; Setup Rating: 6; Fundamental Rating: 2.