Advanced Strategy on Tivity Health Leads to Big Winner
Tivity Health (Nasdaq: TVTY) is a health and wellness company comprised of two divisions: senior health and wellness and nutrition.
Early this year, Tivity Health bought diet and nutrition company Nutrisystem. As a result, its shares plunged from more than $40 to less than $20.
Fundamentally, the company is a very strong operation. However, investors were not willing to give the acquisition a thumbs-up until they saw the results. And results from a major change to a business plan can take a few quarters to bear fruit.
The bet on Tivity Health falling was a good one.
Tivity Health has been bouncing all over the place since we recommended members buy the stock in May. And with a pivotal earnings announcement this week, our members were at risk of taking a big loss (25% is our standard stop loss) if the news was not to the liking of investors and Wall Street analysts.
To prevent a loss like that, we have a very accurate and well thought out method to protect our members, nearly guaranteeing that they can win regardless of the outcome.
We recommended members also buy a low-cost “married” put option that expired after Tivity Health’s earnings were released.
Our members spent $0.25 per share to protect their downside if the Tivity Health shares cratered. If the shares reacted positively, the increase in the share price would more than make up for the $0.25 paid for insurance.
On Thursday, Tivity Health shares soared by almost $2 (they were up more than $2 intraday) on above-average volume. That was a big win, considering the action in the shares in the days before when the shares fell around $15. Yesterday, they closed above $18.
The married puts we recommended lost almost all value, but that loss was a fraction of the gain the shares made.
Using married puts is something we encourage you to do going forward. Covering your stock position can give you peace of mind going into a potentially volatile earnings report, especially when the market is already volatile.
It’s a win-win situation. Even a decline in Tivity Health’s shares would have resulted in an increase in the option price to offset the loss in the share price.
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