JACK - Jack in the Box - Company Profile

Jack in the Box Inc. operates and franchises Jack in the Box quick-service restaurants and Qdoba Mexican Eats fast-casual restaurants primarily in the United States. As of August 10, 2016, it operated and franchised approximately 2,250 Jack in the Box restaurants in 21 states and Guam; and approximately 600 Qdoba Mexican Eats restaurants in 47 states, the District of Columbia, and Canada. The company was founded in 1951.

Jack shares are up 29% year to date after the company reported Q2 earnings of $1.07 that beat estimates by 20 cents. Revenue rose +2.6% to $368.9 million. Same store sales rose 1.1% and the average check rose 3.5%.

They will end 2016 with an additional 20 Jack in the Box stores and 50-60 new Qdoba locations. The company is refranchising many of its stores and believes it can raise earnings by 65-78 cents through cost reductions achieved by shifting company owned stored to new franchisees. Management expects same store sales o rise 2.5% to 3.5% for Jack stores and 4% to 5% for Qdoba stores.

Earnings Nov 21st.

Shares rallied to $99 and the 2015 high on the Q2 earnings. They have held at that level for four weeks. The positive market on Friday allowed JACK shares to break over $100 and start a new leg higher. Apparently, the post earnings consolidation has ended.

JACK does not have LEAPS so I am using the March $105 call, which is the longest dated option series available.

Buy March $105 call, currently $7.20, initial stop loss $96.85.
Sell short March $120 call, currently $1.80, initial stop loss $96.85.
Net debit $5.40

Because of the strong chart and the shorter dated option, you could sell the March $90 put, currently $4.20, instead of the short call to further reduce your net debit.



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