A Bearish Option Trade May Be Best For Troubled Lululemon Stock

Core Insights - Lululemon's stock has declined by 55% year-to-date, facing margin pressures from tariffs and supply chain shifts, while consumer demand weakens as shoppers opt for lower-priced alternatives [1] - The stock is currently trading below both its 50-day and 200-day moving averages, indicating potential further weakness [2] - Analysts expect Lululemon's Q3 earnings on December 4 to show earnings per share of $2.21, a 23% decrease year-over-year, despite a 3% increase in revenue to $2.48 billion [5] Stock Performance - Lululemon's IBD Composite Rating is currently at 46, with shares having trended slightly higher after hitting a low of 159.25 in early September, but still remain below key moving averages [6] - The stock has historically reacted negatively to earnings reports, with declines of approximately 14%, 19%, and 18% following the last three earnings announcements [5] Investment Strategy - Investors may consider a bear call spread to capitalize on potential further weakness in Lululemon's stock, with a setup involving selling a 165 call and buying a 175 call, both expiring on December 19 [2][4] - The bear call spread can be entered for a credit of about $4.50 per share, representing a maximum profit of $450 per 100-share contract if shares trade below 165 at expiration [3]