A ‘Crafty’ Retail Options Trade

Even though the earnings pickings are slim next week, with just a couple of S&P 500 companies reporting, our job is to find the hidden gems. And we think we have one for you. It’s Jo-Ann Stores, Inc. (NYSE: JAS ), the seller of fabrics and crafts that boasts more than 700 retail stores throughout the United States. JAS reports after the bell on Wednesday, Dec. 1, with analysts expecting a modest 19% gain in profits from a year ago. We say “modest” because the company has averaged growth of more than 125% over the past four quarters. And the stock is a big mover after earnings. Following the past three reports, for example, the stock gained an average of more than 7%. Currently, the shares are on a 10% run-up off last week’s low, and are looking to take out the highs reached earlier this month and in April. Also note in the chart below how the stock has put in a series of higher highs since July.   Sentiment toward JAS is mixed, which seems a bit understated for a stock that’s up 28% so far this year. While analysts are strongly behind the shares, the put/call ratio stands at an eight-month high, and the short-interest ratio is more than nine. This tells us that there’s plenty of buying pressure available from unwinding pessimism and a short squeeze . JAS may not have the sizzle of many teen-friendly stores or the appeal of low-end retailers, but the stock has been pointed higher for several months. With earnings expectations on the low end, pessimism plentiful, and a history of popping after earnings, look at JAS as a solid bullish earnings play. Buy the JAS Dec. 45 Call now for around three bucks before the stock moves higher.
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