SNBR Hedged Options Strategy
Popular smart bed company Sleep Number sells beds, mattresses, pillows and bedding related products directly to customers via 600+ retail stores, telephone order, and e-commerce. Adjustable temperature, firmness, motion sensing and automatic contouring, even snoring prevention technology are part of their luxury product catering to an aging population in the middle of a health and wellness boom -- with sleep as an increasingly buzzier part of the conversation. Americans buy 16+ million new mattresses a year, spending an average of ~$1000 per unit, making it a $12.55 billion industry. More people are relocating due to job/work-from-home opportunities and changing real estate trends (opting to buy a new mattress instead of moving an old one) -- the projected steady growth could become a surge. SNBR reports earnings Wednesday after market close, and posted beats for the previous 2 Q's. Here's one argument for the stock being undervalued.
Technically minded investors might also see some promising chart patterns forming as well, and a buying opportunity after a major selloff in the last two years. However, with its recent loss of CFO and announcement that chip shortages were a challenge, an investment in SNBR would not be without uncertainty.
Here's an options investing strategy that offers both downside protection and upside potential. Make a fixed 12% (22% annualized) at maturity as long as SNBR does not fall more than 23%. Further protection: SNBR can fall 31% through expiration before you start to lose any money.
Hedged like this:
Sell 2 $25 puts
Exp 9/15/23
Capital requirement: $4472
Technically minded investors might also see some promising chart patterns forming as well, and a buying opportunity after a major selloff in the last two years. However, with its recent loss of CFO and announcement that chip shortages were a challenge, an investment in SNBR would not be without uncertainty.
Here's an options investing strategy that offers both downside protection and upside potential. Make a fixed 12% (22% annualized) at maturity as long as SNBR does not fall more than 23%. Further protection: SNBR can fall 31% through expiration before you start to lose any money.
Hedged like this:
Sell 2 $25 puts
Exp 9/15/23
Capital requirement: $4472
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