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Trade of the Day: Advance Auto Parts, Inc. (AAP)

John Jagerson and Wade Hansen

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Last month’s earnings from Advance Auto Parts, Inc. (NYSE:AAP) were good, with one important soft spot — same-store sales. However, the stock was able to claw its way back into the gap until Tuesday. We like a bearish entry here to take advantage of a “dead cat bounce” triggered by a report from Morgan Stanley (NYSE:MS) that Amazon.com, Inc. (NASDAQ:AMZN) poses a significant threat to auto parts retailers. We couldn’t agree more.

We wouldn’t compare auto parts retailers to office supply stores completely, but the threat is very similar and is gaining momentum. We expect AAP to drop back to its earnings reaction price in the near term.

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‘Buy to open’ the AAP October 90 Puts (AAP171020P00090000) for a maximum price of $1.75.

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InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news. Get in on the next SlingShot Trader trade and get 1 free month today by clicking here.

Most recently, John and Wade are co-options strategists of Turbo Trader Live — a live, interactive trading room service that runs two hours every trading day the market is open. Turbo Trader Live focuses on long call and put options, as well as long and short vertical spread strategies. Find out how to get in on the live trading action and start making real profits by clicking here.

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