The first full week of earnings season arrived last week and we decided to place our second trade of the season in American Express (AXP) by using a 20-point range, with our short strikes at 140 (puts)and 160 (calls). We felt comfortable with the range as it was not only well outside of the expected range (144 – 156) for AXP, but covered, on a percentage basis, almost every earnings move going back to October 2006. These are the type of setups we prefer to trade.

The historic move in the bond market continued to weigh on stocks last week as the S&P 500 lost 2.4%, the Dow fell 1.6% and the Nasdaq declined by 3.1%.

The historic move in the bond market continued to weigh on stocks last week as the S&P 500 lost 2.4%, the Dow fell 1.6% and the Nasdaq declined by 3.1%.

The market remains under pressure as interest rates rise, which keeps us in a cautious stance -- we’re holding nearly as much cash as we have during the past two years as few stocks are able to sustain any upside. That said, we actually think the market has a solid setup here--there are a decent number of names forming normal launching pads, sentiment is awful and earnings season could be a catalyst. The bulls still have a lot to prove, but we’re remaining flexible should the buyers appear.


Tonight’s issue reviews our remaining names and market outlook in more detail, talks about some big-picture positives to keep in mind, as well as some things we want to see as a sign the buyers are taking control. More watchful waiting is needed, but we’re keeping our watch list up to date should the market’s character change.

I’m in Amish country this week so the Cabot Explorer issue will be briefer than usual today. Markets are facing a 5% dilemma. The benchmark Treasury yield closed just above 4.9%, a fresh 16-year high.

Third-quarter GDP estimated growth may be above 5%, signaling that inflationary expectations are still strong.

The market will likely turn broadly positive when expectations are that interest rate hikes are over – and lower rates may be around the corner.

In the October Issue of Cabot Early Opportunities, I dig into a group of software companies that have upside potential from AI, automation and security. I also feature a diversified bioprocessing and advanced materials company that’s drawing attention right now and go deeper into a very small industrial company that few investors have ever heard of.

As always, there’s something for everybody!

Ahead of the long holiday weekend the market had yet another good week. The S&P 500 gained 1.75%, the Dow rallied 1.5%, and the Nasdaq rose another 1.9%.

This week in an attempt to diversify the portfolio we are adding an energy play.

The story remains mostly the same in the market as it has for the past few weeks: The intermediate-term trend for nearly all major indexes and the vast majority of individual stocks is pointed down. That said, there also are a decent number of stocks holding up fairly well—and with earnings season starting in a major way this week, the potential is there for some leadership to develop if we see some strong upside gaps following reports. We’re all for it happening, but overall it’s best to remain cautious as the market attempts to turn the corner. Once again, we’ll leave our Market Monitor at a level 5.

This week’s list has a wide array of good-looking names, though for our Top Pick we’re going with a liquid leader that, while not in the first inning of its run, acts like it wants to go higher.

Stocks are showing signs of strength as we dive head-first into third-quarter earnings season. Will the latest round of company reports give markets the nudge they need to enter their first substantive rally since mid-summer? Or will they douse the rally with cold water before it really even begins? We’ll have our answer soon. In the meantime, in case it’s the latter, today we add a reliable dividend payer that’s been gaining traction thanks to the restored global supply chain. It’s a brand-new recommendation from Cabot Dividend Investor’s Tom Hutchinson.

Details inside.

We added a November 17, 2023, bull put spread in SPY last week, which gives us three positions. The addition of our bull put spread essentially forms another iron condor, although I will be managing the bear call spread and bull put spread in SPY separately.

Expiration is upon us, and three of our six positions are due to expire this week.

I plan to buy back our calls in WFC, as they are essentially worthless, lock in some profits and immediately sell more call premium.

As for our GDX covered call position, the current probability is basically 50%, so we are in coin toss territory. I’ll update my thoughts on the position, with any necessary alerts, as the week progresses.

Earnings season kicked off late last week with the big banks leading the way. We decided to place our first trade of the season in JPMorgan Chase (JPM) by using a 14.5-point range, with our short strikes at 152.5 and 138. We felt comfortable with the range as it was not only well outside of the expected range (141 – 151) for JPM, but covered, on a percentage basis, all earnings moves going back to October 2006. These are the type of setups we prefer to trade.

Cabot Options Institute Earnings Trader shows you how to use options to profit during the most profitable period in the market: earnings season. Most people are unaware, but you can reliably collect a month’s worth of gains in a matter of days… and sometimes hours.

This week, Dow (DOW) and Nokia (NOK) reported earnings. The deluge for our companies starts next week with twelve companies reporting.

Next week, we will publish the November edition of the Cabot Turnaround Letter on Wednesday and our proprietary Catalyst Report on Friday.

Cabot Options Institute Income Trader is focused exclusively on the creating consistent income through a variety of options selling strategies. Whether you have questions about selling puts, covered strangles, jade lizards or our income wheel approach, Andy is more than happy to help you steepen your learning curve in this live event.

Small caps are still trading at a very steep discount that implies very attractive returns in the coming year. The Wall Street Journal had a so-so piece on this earlier in the week.

The brief earnings rally is already petering as positive surprises from some high-profile companies are being offset by others. The hope of a corporate earnings soft landing is getting some cold water thrown on it.

Better-than-expected big bank earnings along with other earnings beats from notable companies like Netflix (NFLX), United Airlines Holdings (UAL) and Johnson & Johnson (JNJ) are being smothered by overall results. So far, overall results are below average for the quarter.

Explorer stocks were all up this week though it is not clear we are out of the woods yet. Sociedad Química y Minera de Chile S.A. (SQM) jumped from 83 to 90, Infineon Technologies (IFNNY) shares had double-digit gains, and Kraken (KRKNF) was up 8% yesterday and almost 20% over the last two weeks as smaller stocks are in favor.

Cabot Options Institute Quant Trader is focused exclusively on creating consistent returns using high-probability options strategies including bear call spreads, bull put spreads, iron condors and more. Whether you have questions about the strategies, or even about setting up your account, or how to make your own trades, Andy will answer all of your questions

So far, earnings season is showing that investor expectations have become overly negative. Results from banks indicate that consumer activity remains healthy even as domestic economic growth stalls.

The experience for base and precious metals investors since March, when most metals peaked, has been something akin to Chinese water torture. To be sure, there have been periodic opportunities in select metals (and related industries) along the way. But the main trajectory for the sector has been steadily lower most of this year.

For our recommended stocks, earnings season started this week with reports from Walgreens Boots Alliance (WBA) and Wells Fargo (WFC). Next week, Nokia (NOK) reports, and the deluge for our companies starts the following week on October 24 with fourteen companies reporting.

The market has been rallying furiously over the past several days on earnings. Is this the Promised Land or more false hope?

It’s just the kickoff of the third-quarter earnings season and the nation’s major banks have reported. These banks are considered bellwethers for the U.S. economy and numbers are better than expected. The results are reviving hope among investors.

This week was a slow one with few updates to CMCI companies.
It’s earnings season for many large-cap companies, but we will have to wait until November or later to get updates from most micro-caps.

AXP looks to open the day within our range of 134 to 157.5 and, per the mechanics of the strategy, I want to take the trade off the table. I will discuss the trade further in today’s subscriber-exclusive webinar, at noon ET.

Our WFC puts for the July 29, 2022, expiration cycle are essentially worthless. As a result, I want to buy back our WFC July 29, 2022, 35 puts for $0.02, lock in a decent profit and immediately sell more premium. I’m only going out 29 days to the August 19, 2022, expiration cycle. I’ll sell even more put premium in September if all goes well.

As discussed in our weekly issue last week, and on our weekly call, I will be taking a position in American Express (AXP) today.

As the internal condition of the broad equity market shows gradual improvement while short covering continues, I think it’s time we turn our attention to stocks and ETFs that are in a position of relative strength compared with the rest of the market.

Despite being a sloppy mess, the market has offered up some opportunities since May, when a lot of stocks might have put in a workable bottom. However, with the jury still out on that call and a still extremely uncertain environment, I’m taking a “bird in the hand is worth two in the bush” mentality with a few of our names while also looking to keep our portfolio from swelling to an unmanageable size.

As part of the Income Wheel approach, we allowed our BITO and GDX puts to expire in-the-money at expiration last week. As a result, we were issued shares at our chosen put strikes.

On Friday the July calls that we sold against our JD and EQT stock positions expired worthless. Today, both stocks are trading higher, and I want to sell a new set of calls against each. Here are those trades, and approximate prices.

Today is the expiration of five of our July covered call trades. And despite the market having some ups, and even more downs, the Profit Booster portfolio had a pretty good month. Let’s dive in …

JPM looks to open the day well within our range of 103 to 120. As a result, I want to take the trade off for a profit. I will discuss the trade further in tomorrow’s subscriber-exclusive webinar.

After closing out our SPY bear call spread (albeit prematurely) for a decent profit yesterday, I want to continue to take advantage of the inflated volatility that resides in the S&P 500 by adding another iron condor to the portfolio.

I’ve decided to go ahead and buy back our short calls in IEF and VTI for the opportunity to sell more premium in August. Both short calls in IEF and VTI have little to no premium left, so now is as good a time as ever to sell more premium in both underlying ETFs.

We are moving shares of Credit Suisse (CS) from Buy to Sell.

A few Cabot Options Trader subscribers have asked me about ways to protect gains in their portfolios, so I thought I would write to everyone with a couple of strategies using options to hedge your portfolio.

A subscriber recently asked me if I keep a journal of my trades. Many traders keep journals so they can look back at their trades and evaluate what they did right and what they did wrong.

Want to know how the big institutional investors use options? Here is an example of how one trader spent $132 million on three technology stocks.

Options trading has its own vernacular. To know how to do it, you need to know what every options term means. Here are some of the basics.

Our Cabot Top Ten Trader’s market timing system consists of two parts—one based on the action of three select, growth-oriented market indexes, and the other based on the action of the fast-moving stocks Cabot Top Ten features.