GRMN Under Pressure

Just like the stock price, if I saw this guy on the street, I would also be a little apprehensive. Anyway, GRMN is having what we like to call a "distribution day". The following hit the wires this morning:

(9:02 AM ET) LONDON (MarketWatch) -- Shares of Garmin(GRMN, Trade ) dropped 10.5% in pre-open trade as Chief Financial Officer Kevin Rauckman told Reuters in an interview that first-quarter revenue is expected to drop between 40% and 50% from the previous quarter, when sales were boosted by holiday spending. Analysts polled by FactSet had forecast a 40% drop in first-quarter revenue on a sequential basis. Rauckman also was quoted as saying that margins will fall below 40% for the year. Shares in Garmin rival TomTom dropped 5.6% in Amsterdam.

As of 11:30 AM (EDT), the stock is down more than $2.50 and more than 16 million shares have traded hands. I think that Garmin has it's challenges, but I also think this whole thing is overdone. It is an investment and not a trade, so I am sticking with my long position. I had a stink bid in on GRMN two days ago but pulled it thinking it wouldn't get filled. It would have this morning and I would take that bet again right now.

However, my thinking has changed since Lenny Dykstra's article this morning about buying deep-in-the-money calls with Garmin. I think he is right. The premium is minimal with deep ITM calls, and October is far enough out for the stock to regain its mojo, while I don't need to tie up the capital to hold stock until October when I may exercise.

On further weakness, my plan is to double down with ITM calls on GRMN.

By the way, while traveling, I picked up XLF puts both on Tuesday afternoon and on Wednesday morning to hedge my position. I also let half my AAPL calls go this morning when the stock hit $150.00. The stock needs a rest and I wanted to book some profits. I am tired of giving money back as we sit in this trading range.