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Week of January 30, 2023

Ahead of the “big” Federal Reserve announcement on Wednesday, the market surged higher last week.

January 30, 2023
Weekly Update

Ahead of the “big” Federal Reserve announcement on Wednesday, the market surged higher last week. Though of note, as I write about in “What Traders are Saying” below, there are some potential warning signs for the market creeping up.

Regardless, the leading gainer for the week was the Nasdaq, which gained 4.32%, while the S&P 500 rose by 2.47% and the Dow rallied 1.81%.

Stocks on Watch

The early leader for most frustrating missed trade of 2023, by a wide margin, is Shopify (SHOP), which I wrote up last Monday morning in “Stocks on Watch” following several days of bullish option activity. My plan was to buy a SHOP position that morning, but, unfortunately, the stock received two upgrades, and opened higher by $3.50, and I missed my buy. Now what makes this situation worse is the stock kept running the next five days, and closed the week higher by $10!!! GRRRR!

Fortunately, after I missed on SHOP, we bought Disney (DIS) calls instead, and that stock gained $5 on the week. For now, DIS is not as big of a home run as SHOP, but we will take it.

Moving on …

Two weeks ago we closed our Starbucks (SBUX) position for a profit of 200% (COT) and 350% (COTP). In the alert to sell our positions, I noted that I could see us hopping right back into a bullish trade if option activity remained strong. And right on cue, on Monday a trader bought a massive SBUX position, looking for greater upside to come. Here is that trade:

Buyer of 120,000 Starbucks (SBUX) April 115 Calls for $2.02 – Stock at 106 (rolled from March calls).

I’m hotly debating getting back involved with SBUX, though of note the company will report earnings on Thursday of this week.

While the market was strong last week, there was plenty of put buying as well, including in Intel (INTC), which reported a disaster of an earnings report on Thursday afternoon. Here is some of the commentary that was shared by @carlquintanilla on Twitter from Wall Street analysts following the earnings report and subsequent put buying activity:


Friday - Buyer of 10,000 Intel (INTC) June 29 Puts for $2.92 – Stock at 28.

INTC stock has been a trainwreck for years, and I’m intrigued by a bearish play in the stock, which likely would work if the market weakens again.

And finally, I found this large put buying in two leading retailers interesting to close the week … perhaps the sector is next to take a plunge.

Thursday - Buyer of 20,000 Nordstrom (JWN) April 15 Puts for $0.68 – Stock at 18

Friday - Buyer of 20,000 Gap (GPS) June 11 Puts for $0.68 – Stock at 13.25.


The Chicago Board of Options Exchange Volatility Index (VIX) closed the week at 18.5, marginally lower. Of note, I would expect the VIX won’t fall much further as we approach the Fed decision/meeting on Wednesday of this week.

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

Monday – 6
Tuesday – 5
Wednesday – 5
Thursday - 4
Friday – 5

Events for the Week to Come

This week has the potential to be explosive for the market, as well as individual stocks.

In terms of the overall market, traders will be laser-focused on the Federal Reserve announcement on Wednesday, where it is widely expected that the central bank will raise interest rates by 25 basis points.

That announcement won’t likely be the main event, as the bigger market mover potentially will come from Fed Chairman Jerome Powell’s commentary following the rate increase. The market has been pricing in fewer and fewer rate hikes, and even rate CUTS later this year, which makes Powell’s comments about the future path of interest rates a potential powder keg for the market.

Also this week, earnings season ramps up in a big way, as 20% of the S&P 500 will report, led by Apple (AAPL), Amazon (AMZN) and Google (GOOGL) all on Thursday.


What Traders are Saying

While I am encouraged by the strength in the market to start the year, I am growing a touch concerned that the last couple days of gains could be signaling the rally is nearing its short-term end. Here is what I mean …

Many times over my trading career, when the market is rallying, led by leading stocks and sectors, at some point that advance begins to slow down. That is normal.

However, I’ve also seen countless times that as the leaders begin to pause, the hot money then moves into the “worst of the worst” stocks … which I’ve seen soooo many times, and means that the market’s rally is nearing an end.

And this may have been the case Thursday and Friday of last week, as highlighted by Goldman Sachs’ most-short basket of stocks, and their gains on Friday, as seen below:


Hopefully I’m wrong, and the “trash” stock rally means nothing. That being said, when stocks like Lucid (LCID), Beyond Meat (BYND) and Fisker (FSR) are flying higher, my trader intuition, and experience in these types of markets, tells me the market rally may be due to stall.

Open Positions

Long positions: BAC, DIS, GOOG, LVS, PYPL, PINS, VALE, IWM

Bearish Positions: SPY, BX

Bank of America (BAC) February 36 Covered Call – Our BAC covered call trade continues to work perfectly as the stock gained 4.7% last week, closing just shy of our short 36 strike.

Blackstone (BX) March 80 Puts – Following earnings BX gained 12% last week, which is not what we were looking for with our put position. We will likely sell the last quarter of this trade this week, though I may wait to see how the market reacts to the Fed announcement on Wednesday.

Disney (DIS) September 105 Calls – On Friday we closed a third of our DIS calls for $15.40, or a profit of 19.37%. Of note, option activity remains very bullish in DIS, including a buyer of 3,500 Disney (DIS) January 120 Calls (exp. 2024) for $10.80 Friday afternoon.

Alphabet (GOOGL) February 120 Calls – Google’s earnings announcement on Thursday is the last hope we have for the balance of our February calls … though to be honest, I don’t like the odds of the stock moving high enough for our calls to truly come alive.

Las Vegas Sands (LVS) March 44/60 Bull Call Spread – LVS gained another 8% last week, with most of those gains following the company’s earnings announcement. This rally continues to be a monster win for our position, which is now at a potential profit of approximately 210%.

A couple more notes on LVS …

On Thursday Deutsche Bank raised their price target on the shares from 56 to 69, noting the company’s upbeat commentary on Macau. On Friday Argus upgraded the stock from hold to buy.

And finally, option activity remains very strong in the stock, including these trades from Thursday:

Buyer of Buyer of 17,000 Las Vegas Sands (LVS) March 60 Calls for $1.50 – Stock at 57 (rolled from February calls)

Buyer 25,000 Las Vegas Sands (LVS) June 45 Calls for $14.90 – Stock at 58.

PayPal (PYPL) March 80 Call – Ahead of earnings in two weeks, PYPL gained 4% last week, largely in-line with the Nasdaq. Not much more to add.

Pinterest (PINS) March 25 Call – PINS closed the week at 26.75, which is the level the stock has struggled with for months. I would expect a major fall, or hopefully move higher, on earnings in two weeks. Buckle up!

Russell 2000 (IWM) August 185 Call – The IWM gained 2.4% last week which is great for our recently purchased calls.

S&P 500 ETF (SPY) March 420/320 Bear Put Spread – I continue to debate whether we need our SPY puts as we have closed, or taken partial profits, on many bullish positions lately. For now, my lean is to hold these puts through the Fed event on Wednesday.

Vale (VALE) June 17 Calls – VALE gained 3% last week and continues to look great. The company will report earnings in mid-February … though in reality the price movement of gold/copper/iron ore will likely be a bigger driver of VALE’s stock movement.

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.