The Estee Lauder Companies (NYSE:EL) is a manufacturer and marketer of skin care, make-up, fragrance and hair care products. The company's products are sold around the globe under brand names such as Estee Lauder, Clinique, Aramis, Prescriptives, Origins, M.A.C, Bobbi Brown, La Mer, Aveda, Stila, Jo Malone, Bumble and bumble, Darphin, Rodan & Fields, American Beauty, Flirt! And good skin. The firm is also the worldwide licensee for fragrances and cosmetics sold under the Tommy Hilfiger, Donna Karan, kate spade and Michael Kors brands, and it is also developing products to be sold under the Sean John label. Estee Lauder markets its products primarily through upscale department stores, specialty retailers, upscale perfumeries and pharmacies.
Here is another issue that emerged in a search for "technically" favorable spread candidates. The stock has recently moved below a near-term trading range and the pattern suggests a high probability of further downside activity in the coming weeks. However, the small spread credit and the lengthy time remaining until expiration yields a return on investment that falls just short of the criteria for MCM positions. At the same time, it certainly qualifies as a potentially viable candidate for conservative spread traders (and possibly, the model portfolio) if a higher premium can be achieved in the opening transaction.
PLAY (conservative - bearish/credit spread):
BUY CALL APR-50.00 EL-DJ OI=320 ASK=$0.05
SELL CALL APR-45.00 EL-DI OI=1366 BID=$0.35
INITIAL "NET-CREDIT" TARGET = $0.35-$0.40
POTENTIAL PROFIT (X 5 contracts) = $175
RETURN ON INVESTMENT (max) = 7.5%
COST BASIS = $45.35
LOSS-LIMIT/EXIT POINT = $44.50 (cons) - $45.00 (aggr)