Under Armour

Under Armour (UAA) is a rather new name in footwear, sports and casual apparel. Founded in 1996 by Kevin Plank, Under Armour quickly rose to become one of U.S biggest sport brands, along with Nike and Adidas.

However, at the end of January this year, UAA had a cliff-like drop of 50%, from $40 to $20 which frightened investors and put the company to doubt as whether it would recover or would go bankrupt in the near future. The biggest reason for this came from the news that UAA's CFO Chip Molloy left the company for "personal reasons", and the market clearly punished UAA price for the possibility of the company having fraud. However, there are more reasons that can explain the situation. The brand right now lacks some potential or famous sport athletes that boost up their sales. With the decrease in sales, renting costs have been overwhelmed and as the result the company showed bad financial results. These reasons are worth explaining the situation, yet in my opinion, they do not appear critical enough to drive a company to bankruptcy. The company can overcome the situation by successfully hiring a talented CFO and changing its marketing strategy to include more well known sport stars.

With this opinion in mind, I think about "Charlie and Jamie" kind of investment. From the list, the lowest strike price for a call option with the lowest cost per option is the $45 Call with the cost of $0.40. If UAA price recovers to $40 in 100 days, then we have the following calculations:

The option is likely to cost $9.68 by then, and at that time the rate of return will be 24.2 times! For example, if you invested 100,000 options for $40,000 you would receive $968,000. Easy way to make a million isn't it? And if the outcome is not as expected, you can just walk away from the deal, and lose the money you put in for the options, which in this case is $40,000. Even if you are not that adventurous, I still recommend you this investment, as the 24.2 times of return is always worth trying.