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Week of December 5, 2022

After a negative start to the week last Monday, the market surged higher on Wednesday, following what many traders view as a “less hawkish” speech by Federal Reserve Chairman Jerome Powell.

December 9, 2022
Position Update – Vale (VALE)

Ahead of the much-anticipated CPI Report (inflation data) on Tuesday, and the Federal Reserve announcement on Wednesday, I would expect we will maintain the portfolio as is today and in the days to come. That being said, if something pops up on my radar, I will not hesitate to add to the portfolio ahead of these two potentially market-moving events.

In terms of the portfolio, I wanted to bring to your attention an upgrade of Vale (VALE) this morning, as well as some further call-buying activity. First, here are some of the details of the upgrade via Bloomberg, with the lead being a price target hike from 14.5 to 20:


In reaction to this upgrade/price hike, VALE is trading above 17 this morning and is at a new multi-month high.

Also of interest, in early option action this morning, a trader bought 1,000 June 17 calls for $1.94, which is the same strike/call that we own.

December 6, 2022
Blackstone (BX) Put Purchase Follow-Up

Yesterday we added a half position in the Blackstone (BX) March 80 Puts for $7.87. Today, I wanted to dive a bit deeper into this bearish position.

First off, as I noted in the trade alert, option activity was very bearish in BX yesterday, including these trades:

Buyer of 10,000 Blackstone (BX) February 70 Puts for $2.70 – Stock at 83

Buyer of 4,000 Blackstone (BX) March 80/65 Bear Put Spread for $4.40 – Stock at 83.5

Buyer of 10,000 Blackstone (BX) January 70/60 Bear Put Spread for $1.18 – Stock at 81.5.

However, there was even more bearish activity in financials and housing stocks, which also contributed to my decision to add BX puts. Here are those trades:

Buyer of 5,500 Morgan Stanley (MS) February 80 Puts for $1.73 – Stock at 90

Buyer of 6,500 Homebuilder ETF (XHB) September 60 Puts for $6.20 – Stock at 61

Buyer of 7,000 D.R. Horton (DHI) February 75/60 Bear Put Spread for $1.80 – Stock at 85.

The combination of weakness in the banks yesterday (XLF down 2.5%, KRE lower by 5%), as well as the bearish option activity noted above, definitely raised some concerns for me, as the “old school” trader in me always worries about the market when the financials weaken.

And given those worries, in my opinion it was a no-brainer to add bearish exposure to the portfolio via our BX puts.

That being said, I would note that the VIX closed yesterday at 21, which is hardly signaling an imminent dramatic market decline. Because of the lack of fear in the VIX, hopefully my worries are quickly washed away, and the market makes a strong December run higher into year-end.

Stepping back to Blackstone, as noted in the trade alert last Thursday, the company announced it was limiting redemptions of its $69 billion real estate fund after requests breached its limits for the quarter. Below are some analyst notes following this announcement:

BMO Capital lowered the firm’s price target on Blackstone to 90 from 109 and keeps a Market Perform rating on the shares. In response to rising redemption requests, the BREIT began enforcing its previously disclosed redemption limits, and this will likely prove a significant headwind for Blackstone’s medium-term growth.

Barclays downgraded Blackstone to Equal Weight from Overweight with a price target of 90, down from 98. The firm downgraded the shares following Blackstone Real Estate Income Trust’s notice indicating the monthly/quarterly redemption limits had been triggered. While positive on the longer-term retail opportunity for alternative assets, the analyst thinks near-term sentiment for both retail and Blackstone shares “will be very challenging.”

Oppenheimer noted Blackstone shares are down 7.5% while most of its peers are flattish on the day, which he believes to be caused by an announcement by BREIT, its non-traded retail REIT, that it had received repurchase requests for $1.8B in October and that additional repurchase requests in November drove the total above the 5% NAV quarterly limit, so it is limiting withdrawals.

This “is perhaps bad optics and draws criticisms from reporters and politicians,” but Blackstone “clearly has the right to do so” as the Oppenheimer analyst thinks “the reality is that it would be impossible to give retail customers access to private market assets without some kind of gating mechanism.”

The analyst has been Neutral rated on the stock, and remains so because it has had a very rich multiple compared to peers. “BREIT has nothing to do with that stance,” said the analyst, who adds, “The stock may trade down before it trades up as a result of this concern, but two years from now, we doubt anyone will remember this.”

December 5, 2022
Weekly Update

After a negative start to the week last Monday, the market surged higher on Wednesday, following what many traders view as a “less hawkish” speech by Federal Reserve Chairman Jerome Powell. By week’s end the S&P 500 had gained 1.1%, the Dow had added 0.37%, and the Nasdaq had rallied 1.99%.

Stocks on Watch

This week let’s start Stocks on Watch with a big premium call buy in Meta (META), then I will add a bit color as to why the trader may have bought this bullish position:

Thursday - Buyer of 10,000 Meta (META) February 85 Calls for $36.80 – Stock at 119.

Now, the potential catalyst:

Bernstein trading desk: “I’m starting to believe that a TikTok ban might actually happen,” after Janet Yellen on Wednesday said it poses “legitimate national security concerns.”

TikTok, which is a Chinese social media monster, getting banned would likely be a major boom for META/SNAP/PINS … though to be fair, no one really knows if our friends in Washington, D.C. will actually make a big move on the social media company.

Regardless, this trader’s $36.8 million position will be interesting to watch in the next couple of months.

Next up is call buying, also on Thursday, in Intel (INTC), which has been a total train wreck the past several years. Here is that trade:

Thursday - Buyer of 9,000 Intel (INTC) February 30 Calls for $2.01 – Stock at 29.75.

I have little interest in getting bullish exposure to INTC, as the stock looks awful. However, I would note that the call buy above brings the total call buying on that strike to 24,000 purchased in the last two weeks.

And finally, let’s take a look at ANOTHER trade I noted last week but didn’t get involved with, unfortunately:

Wednesday - Buyer of 7,000 Blackstone (BX) December 80 Puts (exp. 12/9) for $0.56 – Stock at 87

Wednesday - Buyer of 3,500 Blackstone (BX) December 86 Puts (exp. 12/23) for $3.15 – Stock at 88.

So what happened in the hours after these BX puts were bought? Thursday it was reported Blackstone Inc.’s $69 billion real estate fund would limit redemption requests after breaching limits this quarter. This news sent the stock lower by 7% on Thursday, the day after the puts above were purchased. GRRRR!

More on this missed trade in “What Traders are Saying”, below.


The Chicago Board of Options Exchange Volatility Index (VIX) closed the week at 19.

I was asked last week if I thought the VIX falling, and falling, and continuing to fall was a bad sign for the market. While others may disagree, the VIX declining is almost always a positive sign for stocks, in my opinion.

However, should the VIX really fall apart, perhaps to the 12-15 range, then I might become more interested in playing a contrarian put buy as the price of such a trade is worth the risk.

Option Order Flow was fairly mixed this past week as my Options Barometer came in at:

Monday – 5
Tuesday – 6
Wednesday – 6
Thursday - 6
Friday – 5

Events for the Week to Come

Ahead of the “big” Federal Reserve meeting on December 14, there will be no FOMC member speeches this week. However, there will be some potentially market-moving economic data points released including ISM Services (ISM) on Monday and the Producer Price Index (PPI) and Consumer Sentiment on Friday.

Of note, following Chairman Powell’s speech on Wednesday and the economic data that followed to close the week, traders are now pricing in an 89% chance the Fed will hike interest rates by 50-basis points next week.

On the earnings front, the following companies will report this week:


What Traders are Saying

After Apple (AAPL) shares fell 5% combined Monday and Tuesday of last week I received an email that essentially said, “You missed on AAPL. You have been writing about put buying in the stock for two weeks, but never pulled the trigger.” Trust me, I’m WELL aware that I missed a great shorting opportunity in AAPL; however, I’m not too terribly upset about it. These are the two reasons why.

First, the market was strengthening when these AAPL puts were purchased. And in general, I don’t buy puts when the market is moving higher.

However, more importantly, large call and put buyers are starting to get their mojo back. This is what I mean.

AAPL put buyers were clearly ahead of the news surrounding iPhone delays/China.

The COUP trader that I wrote about last week bought calls hours ahead of takeover headlines.

As noted above, BX puts were bought hours before news broke on the stock.

And there have been more and more instances recently of unusual option activity making world class calls/trading on insider information.

My point is, if the cheaters are back using options as a way to get exposure to big stock news, I can promise you that I will hop on board with a couple of these plays in the weeks/months to come, and we will profit handsomely.

Open Positions

Bearish Positions: SPY

Bank of America (BAC) December 37 Covered Call – BAC fell 4% last week, as the financials came under some pressure. Of note, we will collect the $0.22 dividend at the end of the month, which drops our cost basis on our covered call to 35.63.

Biotech ETF (XBI) January 84 Call – The XBI once again came alive right as I was starting to lose hope, as the ETF gained 5.7% on the week. Maybe, possibly, the XBI will finally break out of its several months-long chop.

Alphabet (GOOGL) February 120 Calls – GOOGL gained 3.5% last week, closing above 100 for the first time in several weeks.

Cameco (CCJ) December 26 Covered Call – CCJ fell 1.75% last week, and continues to be range bound, which is great for our covered call position. Of note, we will collect the $0.12 dividend at the end of the month, which drops our cost basis on our covered call to 25.36.

Las Vegas Sands (LVS) March 44 Call – On Tuesday of last week, after a couple more bullish days of option activity we bought the second half of our LVS call position. Then, the next day, as the stock surged to new recent highs, we locked in a profit of approximately 20% on a third of our position. Stepping back, I think LVS looks terrific, option activity remains strong, and we will continue to hold the balance of this position looking for greater profits. And finally, on Friday a trader bought 4,100 Las Vegas Sands (LVS) December 48/55 Bull Call Spreads (exp. 12/30) for $2 – Stock at 48.

Occidental Petroleum (OXY) December 65/75 Bull Call Spread – Time is running out on our OXY calls, and my finger is on the sell button if the stock doesn’t get moving higher VERY soon.

PayPal (PYPL) March 80 Call – PYPL was our most disappointing position last week as the stock fell 6%. All of a sudden PYPL, and many of its growth peers, looks suspect yet again.

Pinterest (PINS) March 25 Call – PINS was mostly unchanged on the week … not much more to add as option activity was mostly slow/mixed.

S&P 500 ETF (SPY) March 420/320 Bear Put Spread – For now, I will continue to hold our hedge just in case the market once again falls apart.

Starbucks (SBUX) January 85/110 Bull Call Spread – SBUX is a stock star, having gained yet another 5.5% last week, and trading at a multi-month high. This strong stock move has helped push our position to a potential profit of approximately 280%. Of note, on Friday a trader bought 7,000 June 105 Calls for $9.40 – Stock at 104.

Vale (VALE) June 17 Calls – On Thursday we added a half position in the VALE June 17 calls for $1.81, after several days of bullish option activity in VALE as well as “peers” such as BHP/FCX/GOLD.

Jacob Mintz is a professional options trader and editor of Cabot Options Trader. Using his proprietary options scans, Jacob creates and manages positions in equities based on unusual option activity and risk/reward.