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Week of January 16, 2024

The three leading indexes again made a run at new highs last week as the S&P 500 gained 1.75%, the Dow rallied 0.7% and the Nasdaq added 2.88%.

January 19, 2024
Position Update – Nutanix (NTNX) Potential Profits and a New Mental Stop

Nutanix (NTNX) continues to rise steadily and is this morning trading at a new 52-week high at 54.25

Because I haven’t updated our potential profits on our position in a couple days, and those profits continue to rise, I wanted to let you know that our calls that were bought for $4.46 are now worth $16.75, or a potential gain of 275%.

I am going to continue to hold my call position looking for greater gains. However, in order to protect some of those gains I am setting a new mental stop on our calls at $12.

Finally, if you would prefer to ring the register on some of your calls, that is a fine choice as well.

January 16, 2024
Weekly Update

The three leading indexes again made a run at new highs last week as the S&P 500 gained 1.75%, the Dow rallied 0.7% and the Nasdaq added 2.88%.

This week is expiration for January options and earnings season starts to heat up.

Stocks on Watch

There is no question that my two leading candidates for new positions are Marvell Technologies (MRVL) and Uber (UBER) as both stocks look terrific and the option activity below is very strong:

Thursday - Buyer of 12,000 Marvell (MRVL) February 70 Calls for $1.20 – Stock at 64.5

Buyer of 18,000 Marvell (MRVL) April 65 Calls for $6.20 – Stock at 64.75

Thursday - Buyer of 8,000 Uber (UBER) June 70 Calls for $4.40 – Stock at 63.5

Friday - Buyer of 8,000 Uber (UBER) June 70 Calls for $4.60 – Stock at 64

Friday - Buyer of 4,000 Uber (UBER) June 65 Calls (exp. 2025) for $13.10 – Stock at 64 (rolled from January calls).

While MRVL and UBER are my two lead candidates for new positions, I’m also still intrigued by AMD and NVO, which I’ve written about recently.

And while I like to buy strength in stocks like MRVL, UBER, AMD and NVO, I know that there are Cabot Option Traders who also like to buy the dip on stocks that have fallen.

This brings me to Delta Airlines (DAL), which fell 9% following earnings on Friday. And even though I am not a fan of buying earnings season losers, I did want to bring to your attention this call buy in DAL Friday morning as at least one large trader is looking for the stock to run back to recent highs.

Friday - Buyer of 10,000 Delta Airlines (DAL) April 43 Calls for $1.20 – Stock at 39 (rolled back from April 45 calls).

As I said, I prefer to buy earnings season winners, so this is not a trade for me. But if I did want to buy the dip in DAL, I might target a call with a bit more time until expiration and closer to the current stock price … perhaps the June 39 calls for $3.40.

Volatility and What Traders are Saying

This week I am going to combine the Volatility and What Traders are Saying sections. Here is why …

I received a question late last week from a Cabot Options subscriber asking how it’s possible the VIX could be trading below 13 (closed Friday at 12.70) with the uncertainty of the election coming later this year.

I totally get this subscriber’s thought process on this subject. However, what he failed to understand (which is understandable, as the VIX can be confusing) is that the price of the VIX represents the market’s expectations for volatility over the coming 30 days. And with the election many months away, the VIX isn’t yet pricing in concern about the volatility surrounding that event.

Switching gears a bit, one might ask, how does the market tend to do in the months preceding a presidential election, and then afterwards?

Via @TrendSpider on X (Twitter), it appears that there is typically a market run-up in the months preceding the vote, the market chills out right before, and then rallies after, as seen below:


Stepping back, I expect we will again add a hedge to the portfolio well ahead of the election, just in case something goes sideways. But for now, with the VIX below 13, which is not signaling concern, option activity strengthening (see below) and with so many months until the event, I don’t feel like we need to add protection (though that can change quickly).

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

Monday – 7
Tuesday – 5
Wednesday – 6
Thursday - 6
Friday – 6

Events for the Week to Come

This is the second week of earnings season, and the headliners will again be the leading financials including Morgan Stanley (MS) and Goldman Sachs (GS) on Tuesday, followed by several regional banks (USB, MTB, NTRS, KEY, FITB, STT) to close the week.


Open Positions

Celsius (CELH) July 60 Call On Tuesday of last week we added the CELH July 60 calls to the portfolio for $10.50. The stock looks great, and traded at a new recent high on Friday before pulling back with the market.

Intel (INTC) January 34 Call – With just four days to go until our INTC calls expire our position is at a potential profit of approximately 242%. As is always the case, we will sell our position at some point before expiration so we don’t take ownership of the stock.

Li Auto (LI) June 40 Call – LI, and nearly all China-related stocks, can’t get out of their own way, and unless something changes soon, I am going to take a loss on a piece of this position early this week.

Nutanix (NTNX) April 37.5 Calls – NTNX closed Friday at a new 52-week high and looks terrific. Also of note, last week there were takeover rumors surrounding the company and traders bought calls several times including:

Wednesday - Buyer of 1,600 Nutanix (NTNX) January 47.5 Calls for $0.90 – Stock at 47 (also a buyer of February 52.5 calls)

Thursday - Buyer of 2,000 Nutanix (NTNX) February 52.5 Calls for $0.80 – Stock at 47.7.

Palantir (PLTR) April 19 Call – PLTR is an interesting stock. On the one hand, it has mostly been chopping around and not really participating in the recent rally. But on the other hand, option activity picked up steam last week. For now, let’s hold our position as is.

Equal Weight ETF (RSP) June 158 Calls – The RSP is mostly chilling out along with the market near its 52-week highs. Not much more to add other than this is a bull market play that should work if the indexes break out.

Snap (SNAP) August 17 Calls – SNAP flirted with new highs on Wednesday and Thursday of last week before pulling back a bit on Friday. Big picture, the stock looks terrific.

TJX (TJX) April 92.5 Calls – Speaking of stocks that look great, TJX closed at a new 52-week high on Friday. Our position is down marginally because of option decay. Though if the stock can keep its momentum our calls could move meaningfully higher.

Financials ETF (XLF) March 33 Put At this point our XLF puts are largely a back-pocket hedge just in case something goes really sideways in the market.

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.