June 12, 2023
Stocks on Watch - Intel (INTC)
Intel (INTC) has been a disaster for years, especially when compared to its semiconductor peers. And while the chart looks awful, bullish option activity has perked up in the stock in recent days, including these trades this morning:
Buyer of 17,000 July 33 Calls for $1.37 -- Stock at 32.5
Buyer of 5,000 September 37 Calls for $1.27 -- Stock at 33
The call buying above is a small sample of this bullish option activity in INTC in early trade today, as calls are outpacing puts on a ratio of 5.3:1 this morning (230k calls vs. 43k puts).Stepping back, there are plenty of stocks that look better than INTC.
That being said, calls are without question inexpensive in the stock, and IF I were looking to get involved (which I’m not, for now), the September 33 calls for $2.75 are intriguing.
June 12, 2023
Weekly Update
Ahead of a big week for the market, the S&P 500, Dow and Nasdaq all rose marginally last week. That being said, while the indexes were modestly higher, there was plenty of daily rotation last week, and there likely will be more of the same this week ahead of the Federal Reserve announcement on Wednesday.
Stocks on Watch
Having added Shopify (SHOP) on Friday (more on that in “What Traders are Saying” below), and with UBER and DKNG in the portfolio already, my next buy may be away from the growth area.
That being said, it’s hard to ignore the call buying in growth stocks, including these trades from late last week …
Friday - Buyer of 4,800 Advanced Micro Devices (AMD) August 140 Calls for $6.75 – Stock at 126
Friday - Buyer of 50,000 Rivian (RIVN) July 17.5 Calls for $0.50 – Stock at 14 (130,000 calls bought in the last week)
Friday - Buyer of 1,000 Palo Alto Networks (PANW) July 230 Calls for $4.55 – Stock at 221.
And finally, let’s take a look at Target (TGT) which has been a disaster in the last month, having fallen 19%, and closing Friday at a new 2023 low following a downgrade. With the stock at its lows on Friday a trader bought this bearish position:
Friday – Buyer of 4,000 Target (TGT) July 125 Puts (exp. 7/14) for $3.05 – Stock at 128.
I’ve flirted with taking a speculative shot that the political hot potato that Target has become may pass, and the stock could rebound in the future. However, given the continued stock weakness, and now this put buy, I’m not touching this stock (for now).
Volatility
The Chicago Board of Options Exchange Volatility Index (VIX) closed Friday at 13.90, or lower by another 8% on the week.
I have to be honest: I’m SHOCKED the VIX closed below 14 on Friday, ahead of a toss-up Fed meeting on Wednesday. SHOCKED! This lack of fear leads me to believe traders are no longer worried about these Fed events, which is very surprising.
Option Order Flow was fairly mixed this past week as my Options Barometer came in at:
Monday – 6
Tuesday – 5
Wednesday – 5
Thursday - 6
Friday – 6
Events for the Week to Come
This week could be a doozy as traders will be focused on inflation data via the Consumer Price Index (CPI) on Tuesday, and Producer Price Index (PPI) on Wednesday.
Then the big event of the week will be the Federal Reserve announcement later on Wednesday afternoon. Traders now see a 35% chance of an interest rate hike at that meeting.
On the earnings front, it will be a quiet week outside of announcements from Oracle (ORCL) on Monday and Adobe (ADBE) on Thursday.
What Traders are Saying
Options trading is all about pushing the chips to the center of the poker table when the risk/reward is lined up in your favor and when the signals are telling you it’s time to act. And while I have no clue what traders are targeting in Shopify (SHOP), there is no way I wasn’t getting involved after weeks of call buying, which continued on Friday including:
Buyer of 10,000 July 70 Calls for $1.50 – Stock at 61
Buyer of 6,000 July 70 Calls (exp. 7/14) for $1.25 – Stock at 61.25
Buyer of 800 January 107 Calls for $1.35 – Stock at 61.5 (odd trade)
Buyer of 1,200 September 65 Calls for $5.70 – Stock at 61.5.
The trades above are a small sample of this call buying activity, as calls outpaced puts on a ratio of 4.8:1 (170k vs. 35) on Friday.
How this plays out, and if the trade will be a success or failure, is truly anyone’s guess. That being said, given the market’s strength and this call buying activity, this is the exact type of set-up I hunt for and why we added the stock to the portfolio.
Open Positions
Long positions: BAC, BSX, CLF, DKNG, FTI, IWM, UBER
Bearish Positions: SPY
Bank of America (BAC) July 31 Call – BAC gained 2% last week as financials showed some signs of life. Our covered call is doing just fine.
Boston Scientific (BSX) November 55 Call – BSX and other slow/steady med-tech plays are not in vogue for the time being as money races into tech and then more recently beat-up stocks (BAC/CLF/etc.)
Cleveland-Cliffs (CLF) July 16 Covered Call – CLF gained 6.5% last week as commodity plays came alive. This was a positive development for our covered call that is in good shape.
DraftKings (DKNG) January 25 Call – On Tuesday we locked in a profit of 18% on a third of our DKNG calls. I had hoped for over 20%, but the stock fell just after I sent my trade alert.
Big picture, the stock looks terrific and our trade is in good shape.
TechnipFMC (FTI) June 14 Covered Call – With just one week until expiration FTI is now trading $0.90 above our short strike price. Should the stock hold at these levels, and above 14, we may be taken out of our covered call for a nice profit.
Russell 2000 (IWM) August 177 Call – The IWM came alive yet again last week, especially on Tuesday and Wednesday as the ETF gained 4% on those two days. Our calls are back at a profit … for now.
Shopify (SHOP) January 62 Call – On Friday we added SHOP to the portfolio via a January call buy. The reason I chose January was that October was the next closest “longer-term” option choice and that seemed too close with just five months until expiration.
S&P 500 ETF (SPY) September 400 Put – While the rest of the portfolio had a great week, not surprisingly our lone bearish position did not. With the VIX so low, I’m debating bailing on this September put and buying a put with more time until expiration.
Uber (UBER) December 40/50 Bull Call Spread - UBER gained another 3.3% last week, closing at a new recent high. Our position is in great shape, and option activity remains strong.
