Harman International Industries (NYSE:HAR) is a manufacturer of high-quality, high-fidelity audio and electronic systems for consumer and professional use. The company is organized into segments based on the end user markets it serves. The Consumer Systems Group designs, manufactures and markets loudspeakers and audio, video and electronic systems for vehicle, home and computer applications. The Professional Group designs, manufactures and markets loudspeakers and electronics used by audio professionals in concert halls, stadiums, airports and other buildings and for recording, broadcast, cinema and music reproduction applications.
Stocks in the Automotive Parts group were pummeled Wednesday after analysts lowered their earnings estimates for several suppliers on expectations of lower overall vehicle production in the coming months. While HAR does not compete directly with the majority of these firms, investors did little to support its shares as the issue slid 4% on heavy volume. The brisk profit-taking has pushed the stock below a recent trading range and without a bullish catalyst, it should remain in a relatively neutral trend for the next few weeks. Traders should target a higher credit in the spread initially, to take advantage of any near-term rebound in its share value.
PLAY (less conservative - bearish/credit spread):
BUY CALL APR-125.00 HAR-DE OI=332 ASK=$0.50
SELL CALL APR-120.00 HAR-DD OI=248 BID=$0.95
INITIAL "NET-CREDIT" TARGET = $0.55-$0.60
POTENTIAL PROFIT (X 5 contracts) = $275
RETURN ON INVESTMENT (max) = 12%
COST BASIS = $120.55
LOSS-LIMIT/EXIT POINT = $117.00 (cons) - $119.50 (aggr)