GRMN Trying to Find Place In the World

Garmin (GRMN) shares are down over $3.50 today on a downgrade from Pacific Crest and are currently trading at $57.10. We’ve seen some bullish activity coming across the tape today. Traders are buying Aug 60 calls. This is a good example of how difficult it can be to determine whether order flow is speculative or for hedging purposes. Pacific Crest gave a price target in the mid $40’s for Garmin, citing an inability to remain relevant and competitive with giants such as Samsung and Apple in its personal navigation devices and other products. If this order flow is indeed speculative, it would likely be a short-term bet.

Garmin is trading off its 52-week high of $62.05 but has performed very well on the year despite the recent bad press, up over 30% YTD. The charts are ugly for bulls as the stock is trading below all significant levels on the Ichimoku cloud. This could be seen as a buying opportunity as the stock has found some buyers around the $57.00 level. Coupled with the activity in the Aug 60 calls we have seen, the charts could be indicating a nice spot to get long Garmin for a short period.

The Trade:

Buy the Aug 60 calls for $1.30

Risk: $130 per 1 lot

Breakeven: $61.30


The Greeks

Delta: Long

Gamma: Long

Theta: Short

Vega: Long