January 12, 2023
Bank of America (BAC) Earnings
Tomorrow before the market open Bank of America (BAC), as well as JPMorgan (JPM) and Wells Fargo (WFC), will kick off earnings season. We own a covered call position in BAC, that is working well, and will continue to hold through the announcement. Below is what the options market is pricing in for the stock.
BAC - With the stock trading at 34.75, the options market is pricing in a move of $1 this week, or 33.75 to the downside and 35.75 to the upside.
Open interest is split evenly call vs. put.
Skew is pricing in typical downside risk, and a hint of upside interest.
Stepping back, our February 36 covered call is working well, and we will let the earnings situation play out tomorrow, and then will evaluate how we will manage the position in the month to come.
January 9, 2023
Having just returned from vacation, in this morning’s Weekly Update I am going to focus my attention on where we stand with our positions. However, going forward, I/we are fully back to the normal schedule.
The good news during my week off from the market is our portfolio, while not perfect, had a very good week. Let’s dive in …
Long positions: BAC, XBI, GOOG, LVS, PYPL, SBUX, CCJ, PINS, VALE
Bearish Positions: SPY, BX
Bank of America (BAC) February 36 Covered Call – Ahead of earnings this Friday, BAC gained 4% last week, and appears to be re-emerging nicely from the stocks late December sell-off. Our position is in good shape.
Blackstone (BX) March 80 Puts – BX gained 6.5% last week which in the short run is a negative for our bearish position. However, of note, the source of so much of Blackstone’s issues, the BREIT fund, made a highly unusual deal last week, as noted by Reuters …
“Blackstone on Tuesday said it had secured a $4 billion investment from the University of California in its unlisted real estate income trust (BREIT) that has been plagued by investor redemptions, after the private equity firm committed $1 billion to backstop the university’s returns in the fund.
“UC Investments, the University of California’s investment arm, agreed to hold its investment in BREIT for at least six years. In exchange, Blackstone will offer $1 billion of its own investment in BREIT as collateral, allowing for that money to go to UC Investments to make up for any shortfall if the university does not achieve a minimum 11.25% annualized net return through January 2028.”
Biotech ETF (XBI) January 84 Call – The XBI closed last week at 83, which is just short of our 84-strike price. Time is 100% an issue with the balance of our calls, though of note, the “big” annual JPMorgan Healthcare Conference kicks off today, which often times leads to big deals getting done, and stock/sector movement.
Alphabet (GOOGL) February 120 Calls – GOOGL still is stuck in the mud like its mega-cap peers. We need a big move higher for our calls on earnings later this month.
Cameco (CCJ) January 24.5 Covered Call – CCJ gained 8% last week, and is now just short of our 24.5 strike. This is the ideal scenario headed into expiration in two weeks.
Las Vegas Sands (LVS) March 44/60 Bull Call Spread – LVS gained another 7.5% last week and has the look of a market leader. Our calls are now at a potential profit of approximately 100%.
PayPal (PYPL) March 80 Call – Despite growth stocks largely struggling last week, PYPL gained 7.5%.
Pinterest (PINS) March 25 Call – Speaking of growth stocks struggling, PINS “only” gained 1% last week, though again is flirting with our 25 strike.
S&P 500 ETF (SPY) March 420/320 Bear Put Spread – Our SPY bear put spread is now at a potential profit of 75%, and I will continue to hold this hedge in a suspect market.
Starbucks (SBUX) January 85/110 Bull Call Spread – Ahead of expiration in two weeks, our SBUX bull call spread is now at a potential profit of 320%.
Vale (VALE) June 17 Calls - VALE broke out to a new multi-month high last week, having tacked on another 4% of gains. Our calls are off to a good start, at a potential profit of 17%.
However, I would note the stock is indicated marginally lower this morning following political unrest in Brazil (headquarters of Vale) this past weekend.