Locking In Peloton Gains

By admin On Sep 3, 2020

With so many gyms closed due to COVID-19 lockdowns, one of the companies benefiting from that has been Peloton Interactive Inc (NASDAQ:PTON). Peloton’s signature product is a stationary bike that costs about $2,500 with accessories, after which you pay $39 per month for online classes taught by instructors such as Leanne Hainsby. Here she talks about making people smile.

One Of The Winners Of The COVID-19 Economy

[embedded content]

Peloton shareholders have certainly had something to smile about, with the stock up more than 220% year-to-date as of Wednesday’s close.

Dan Loeb’s Third Point posted gains mostly from its equity book in August, although credit also added about 100 basis points to the return. Q2 2020 hedge fund letters, conferences and more Taking profits from activist campaigns On his call with investors about the fund’s August returns, a transcript of which was provided to ValueWalk, Read More

Data by YCharts

That big spike on Tuesday came after JP Morgan raised its price target for Peloton Interactive Inc.

Maybe It’s Time To Lock In Some Gains

There are a couple of obvious reasons why longs may want to lock in some gains here. The first is that this market advance has been kind of nuts, as Zero Hedge suggests below, noting the level of the VIX relative to the recent market highs.

This is the highest VIX ever at an all time high in the S&P pic.twitter.com/IIzTgtN1YB

— zerohedge (@zerohedge) September 2, 2020

The second is that lockdowns are starting to lift. Even in New Jersey, which has had one of the strictest lockdowns in America, gyms finally opened on September 1st.

One might speculate here that Peloton customers who got used to exercising at home might continue to do so, but consider a counterpoint to that: a lot of people have been going stir crazy from the lockdowns. Many of them will welcome the opportunity to leave their homes and do a spin class in a gym instead of riding a Peloton at home.

Adding Downside Protection To Peloton Interactive Inc

As you might expect, given the high VIX, Peloton Interactive Inc, like many stocks, is pretty expensive to hedge with put options now. It’s actually inexpensive to hedge with some optimal, or least-expensive collars though. In the video below, I walk through a couple of examples using the Portfolio Armor iPhone app.

[embedded content]