Common Cents purchased November 20 2015 call options with a strike price of 90 for $7.30. The options were purchased when RH's share price neared $91.50. Going forward, Common Cents plans to sell the options for at least a 10% profit (~$8.00). For this to happen, RH's share price will need to increase by up to 8.7%.
RH's stock has declined quite a bit recently due to the marketwide decline and, in part, due to an unpleasant forecast of future earnings by Williams Sonoma during its recent quarterly report. As far as the marketwide decline, much of it is due to declining oil prices and fears over a slowing Chinese economy. Declining oil prices are, at a minimum, neutral for RH. Any decline in fuel prices increases the funds available to spend at RH stores; however, I believe that most of RH's customers are in the affluent category and are not overly affected by oil prices.
The fears of a slowing Chinese economy does not have a direct affect on the US economy, (All of RH's stores are located in the US). A much more significant economic slowdown in China may creep over to the US economy (and elsewhere) eventually, but we are nowhere near that severity at this moment.
RH reports earnings on September 10. The stock usually spikes on the positive earnings reports, and analysts have decreased earnings estimates since the last report. Therefore, RH is prime to overachieve the lowered expectations on this next earnings call, barring a surprisingly large effect of port slowdowns on the supply chain.
Common Cents Take: RH's share price has decreased substantially due to market volatility on factors that have little to do with RH's business. Thus, the low $90's are attractive prices to purchase RH shares.
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