Make 178% Overnight on Terrible Fast Food

Last week was another heart-pounding week in The War Room.

It all started with Karim’s 123% winner on General Electric…

Then came my 178% winner on Yum! Brands (NYSE: YUM)…

Followed by my 116% winner on Pinterest…

In today’s issue of Trade of the Day, I’d like to walk you through exactly how we structured the play on Yum! Brands.

You see, we’ve discussed the strategy of “Smart Speculation” here in Trade of the Day before, but this Yum! Brands trade represents yet another example of how to balance risk vs. reward to hit a substantial overnight winner.

Armed with this explanation, the next time you have the opportunity to make 178% overnight, you’ll be in position to ring the register!

Here’s how it happened…

Yum! Brands jumped onto my radar on October 29 – the day before it was scheduled to report earnings.

As I’m sure you know, Yum! Brands operates KFC, Pizza Hut and Taco Bell (three of the worst fast-food restaurants you can imagine). It operates more than 23,000 KFC restaurants, 18,000 Pizza Hut restaurants and 7,000 Taco Bell restaurants in more than 145 countries globally.

Going into the report, I noted to The War Room that Yum! Brands’ last three earnings reactions yielded moves of 6%, 1.4% and negative 5%. Therefore, if we could catch a move that exceeded these last three results, we could have a big winner on our hands.

With a risk-reward scenario that favored making a trade, we bought the Yum! Brands November $111 calls and November $109 puts for a total entry of about $3.50.

Armed with this position, we didn’t care whether Yum! Brands moved up or down in reaction to earnings. All we wanted to see was a move large enough to exceed our recommended total call and put entry price of $3.50.

As it turned out, Yum! Brands reported earnings per share of $0.80, which missed the FactSet guidance of $0.96. Its revenue of $1.34 billion was also down from $1.39 billion – but in line with the FactSet consensus. Its same-store sales growth was 3%, which came in below the 3.3% FactSet guidance.

Oh, and the company had also bought a stake in Grubhub, which got clobbered earlier that week in reaction to poor earnings.

In response, Yum! Brands was trading lower – and I wrote, “On a yearly chart, the best support level is around $100.”

As you can see below, Yum! Brands was crushed on this news…

Action Plan: Thanks to this fall, the combination of Yum! Brands calls and puts War Room members entered for $3.50 was sold for $9.60, good for an overnight gain around 178%!

This is one example of how we’re playing earnings reports in The War Room to lock in overnight winners. Here’s what War Room members had to say about the Yum! Brands trade…

Great Day already, $9,965.00 profit. Keep listening and following Bryan and Karim.” – Kim C.

Total gain this morning on GE, CROX, YUM, & CAKE = $5,600.” – Thomas W.

I have been up with YUM, $5,000 sold at $8.50.” – Shedthikere M.

YUM puts in at $1.97 out at $10 even.” – John S.

Starting this week, we’re preparing to enter into a new set of earnings candidates. If you’d like a shot at winners like this, you’re invited to join me in The War Room today!

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