JD Sports Trade Insight
10-09-24
On August 22, JD Sports posted a 2.4% increase in underlying sales for the second quarter, showing progress compared to the prior quarter. However, the company expressed caution regarding its outlook for the remainder of the year due to ongoing global economic uncertainties, with a question still around interest rates and October’s Labour budget.
The FTSE 100-listed firm maintained its full-year 2024/25 profit forecast, expecting a pre-tax and adjusted earnings range of £955 million to £1.035 billion, up from the £917.2 million recorded in 2023/24.
There have also been rumours of a takeover recently, as market sources in early August had said there were reports of a potential strategic buyer being interested in JD Sports (Reuters London). However, the chief executive of British sportswear retailer JD Sports Fashion said he had “no comment on rumours” when asked by Reuters about recent bid speculation in the group.
If you look at the chart below, since the spike up on earnings on 22nd August, we rallied up to 150 from 128 within two days. Having then pulled back to the original point of volatility, we have now broken the short-term daily trend and are still above the 20, 50 and 100 day moving averages.
After a break above the 150 level on 23rd August, we would then look to test the yearly highs of 166.60 from which we broke down 36% at the start of the year.
With overall trends looking up, we could then see a test of the 2023 high of 186.65, especially if interest rates and inflation come down throughout next year, which could increase spending within the retail space.
Chart displaying JD Sports stock price 2022 to present
Call Option
Trade Idea
Buy a Call Option
JD Cash Price = £1.3915 (as of 10/09/2024 @ time of writing)
Total consideration: £120.50 (excl. fees + commissions)
1 (contract) x £0.125 (contract price) x 1000 shares (contract size) = £125.00 debit
A 35% increase on the current share price to £1.8089 by 21-MAR-2025 expiry would value the call option @ £1.8785 (share price) – £1.50 (strike price) = 38p for a total of £380 (please note contract size of 1000 shares); yielding a 215% return on your initial investment.
The £1.50 call option would break even if the JD share price increased to £1.625 at expiry on 21-MAR-2025
Defined risk profile, maximum loss of a long option position is equal to the premium paid.
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