Options Trade of the Day
Dicks Sporting Goods Inc (NYSE:DKS) Calls
Wednesday, February 04, 2015

**OPTIONS TRADE OF THE DAY: Buy the DKS Mar 2015 50.000 call (DKS150320C00050000) at or under $4.00, good for the day. Place a protective stop limit at $1.60 and a pre-determined sell at $7.50.

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by Ian Harvey

February 04, 2015

Introduction

**The February Barometer Identifies “Dicks Sporting Goods” As A Potential Starter!**

There are several companies that the February Barometer provides some vital information about and helps identify historic outperformers for the month -- this data deals with stocks that have overachieved during a single month – which provides valuable information for short-term traders, particularly options traders. Members of Stock Options Made Easy have already enjoyed a recommendation based on this information, and it is felt that there is plenty of scope for other profits to be had by all.

One such stock is Dicks Sporting Goods Inc (NYSE: DKS), a sports and fitness specialty omni-channel retailer offering a range of brand name sporting goods equipment, apparel and footwear in a specialty store environment, which is certainly one of these outperformers in the month of February.

DKS has finished February higher in nine of the past 10 years. On average, the stock has gained 3.5% during the month -- including a respectable 2.2% in 2014. This year, the shares were off to a fast start, advancing more than 11% to trade at $55.65 -- not far from an annual peak of $57.85, tagged last March – however, last Friday saw a report that the company is not for sale and caused a pullback – which is certainly beneficial for this options trade.

Technical Oulook

Dicks Sporting Goods Inc has a 52 week low of $41.30 and a 52 week high of $57.85. The stock has a 50-day moving average of $51.35 and a 200-day moving average of $46.56.

The company has a market cap of $6.601 billion and a price-to-earnings ratio of 20.80.

Earnings

Dicks Sporting Goods last issued its quarterly earnings data on Tuesday, November 18th. The company reported $0.41 EPS for the quarter, meeting the Thomson Reuters consensus estimate of $0.41. The company had revenue of $1.50 billion for the quarter, compared to the consensus estimate of $1.53 billion.

During the same quarter in the prior year, the company posted $0.40 earnings per share. The company’s quarterly revenue was up 9.0% on a year-over-year basis. On average, analysts predict that Dicks Sporting Goods Inc will post $2.81 earnings per share for the current fiscal year.

Analysts Opinions

Dicks Sporting Goods has recently received a number of price target changes and ratings updates:-

• 1/13/2015 – Dicks Sporting Goods is now covered by analysts at Imperial Capital. They set an “in-line” rating and a $60.00 price target on the stock.

• 1/11/2015 – Dicks Sporting Goods had its “hold” rating reaffirmed by analysts at Canaccord Genuity. They now have a $49.00 price target on the stock.

• 1/9/2015 – Dicks Sporting Goods was given a new $60.00 price target on by analysts at Monness Crespi & Hardt. They now have a “buy” rating on the stock.

• 1/9/2015 – Dicks Sporting Goods was downgraded by analysts at Susquehanna from a “positive” rating to a “neutral” rating. They now have a $61.00 price target on the stock, up previously from $56.00.

• 1/9/2015 – Dicks Sporting Goods was downgraded by analysts at Robert W. Baird from an “outperform” rating to a “neutral” rating. They now have a $58.00 price target on the stock, up previously from $53.00. They noted that the move was a valuation call. They noted that the move was a valuation call.

• 1/8/2015 – Dicks Sporting Goods was downgraded by analysts at CRT Capital from a “buy” rating to a “fair value” rating. They now have a $55.00 price target on the stock, down previously from $58.00. They noted that the move was a valuation call. They noted that the move was a valuation call.

• 1/8/2015 – Dicks Sporting Goods had its price target raised by analysts at Deutsche Bank from $52.00 to $56.00. They now have a “buy” rating on the stock.

• 1/8/2015 – Dicks Sporting Goods was downgraded by analysts at Goldman Sachs from a “buy” rating to a “neutral” rating. They now have a $57.00 price target on the stock. They noted that the move was a valuation call. They noted that the move was a valuation call.

• 1/7/2015 – Dicks Sporting Goods had its “hold” rating reaffirmed by analysts at Wells Fargo & Co..

• 12/19/2014 – Dicks Sporting Goods had its price target raised by analysts at Citigroup Inc. from $54.00 to $57.00. They now have a “buy” rating on the stock.

• 12/3/2014 – Dicks Sporting Goods had its “neutral” rating reaffirmed by analysts at Zacks. They now have a $51.00 price target on the stock. Zacks’ analyst wrote, “DICK’S Sporting posted better-than-expected earnings results in third-quarter fiscal 2014 on the back of successful implementation of its omni-channel strategies and restructuring initiatives. It also raised its full year earnings guidance and remained optimistic about the fourth quarter. The company’s growth prospects appear promising as its strategic measures of consolidating its store base and using technology to provide better services ensure healthy relationship with existing customers while attracting new ones. We also appreciate the company’s decision to reduce exposure in the underperforming golf and hunting categories which will allow it to focus on profitable ventures. However, the stock remains vulnerable to sluggish economic recovery and cautious consumer spending. Risks of sourcing merchandise from overseas markets may also drag its results going forward. Thus, our Neutral recommendation on the stock remains intact.”

Conclusion

At this time there are many traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), who are bearish in their approach to DKS. The equity's 50-day put/call volume ratio of 0.87 ranks in the 88th annual percentile. In the same vein, DKS' put/call open interest ratio of 1.73 is just 1 percentage points from a 12-month peak -- hinting at a healthier-than-usual appetite for short-term puts over calls. While a number of these put traders may be shareholders hedging against unexpected downside, a capitulation among the "vanilla" bears could usher in a fresh wave of buying power, and added to this the historic outlook based on the February Barometer, should definitely help this recommendation come to fruition.

Therefore, based on the facts above the following options trade is recommended…..


**OPTIONS TRADE OF THE DAY: Buy the DKS Mar 2015 50.000 call (DKS150320C00050000) at or under $4.00, good for the day. Place a protective stop limit at $1.60 and a pre-determined sell at $7.50.


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