Generac Holdings (GNRC) reported better-than-expected earnings and revenue that was in line with estimates, as well as a reduced full-year forecast that it had pre-announced. While revenue was up 15% year over year, adjusted earnings were down 26%, due in part to $17.9 million worth of bad debt following a bankruptcy filing by one of its customers. Management also warned about facing continued headwinds through the first half of next year.
The stock is down around 10% since the announcement. Fortunately, we had a protective put in place to hedge our position against just such an outcome.
Today, I am recommending we roll our short call and long put down to lower strike prices. The cash we generate will go a long way toward reducing our cost basis on the position and offsetting the decline in shares.
Current Stock Price: $103.79
Current Cost Basis: $120.11
- Buy to close the GNRC Nov Monthly (11/18) 130 Call for around $0.30
- Sell to open the GNRC Nov Monthly (11/18) 115 Call for around $1.85
- Set initial credit limit at $1.55, but adjust as needed to roll today
- Sell to close the GNRC Nov Monthly (11/18) 110 Put for around $10.75
- Buy to open the GNRC Nov Monthly (11/18) 90 Put for around $1.25
- Set initial credit limit at $9.50, but adjust as needed to roll today
New Cost Basis: $109.06