June 24, 2024
Weekly Update
While the gains/losses in the three major indexes were mostly muted last week, there was some interesting rotation out of the AI/Semiconductor theme and into recent underperformers … though this is hardly anything to write home about as it was just two days of this type of action.
By week’s end, the S&P 500 gained 0.65%, the Dow rose by 1.75%, and the Nasdaq fell marginally.
Stocks on Watch
In this space two weeks ago, I highlighted bullish option activity in Micron (MU) and this activity continued last week as well, including these trades:
Buyer of 6,000 Micron (MU) October 165 Calls for $12.95 – Stock at 148
Buyer of 2,000 Micron (MU) September 250 Calls for $1 – Stock at 148
Buyer of 1,000 Micron (MU) June 280 Calls (exp. 2025) for $7 – Stock at 148
Buyer of 1,300 Micron (MU) September 210 Calls for $3.80 – Stock at 152
Buyer of 1,200 Micron (MU) October 165 Calls for $16.05 – Stock at 152
What I find interesting is that this call buyer is buying traditional expiration cycles and strikes, as well as FAR out-of-the-money calls
(October 165 calls, all the way up to September 250 calls and June 280 calls (exp. 2025).
This activity is exactly what I look for when looking for unusual option activity, though I do want to note that the AI theme cooled off last week, and the company will report earnings on Wednesday.
This will be an earnings reaction that I will be very interested in, and should it be positive, we could get involved with MU very quickly.
Volatility
The Chicago Board of Options Exchange Volatility Index (VIX) closed the week at 13. Not much more to add regarding the VIX other than it remains at historically low levels despite worrisome breadth issues in previous weeks and AI stocks coming under pressure late last week.
This is encouraging action in my opinion for the market.
Option Order Flow was fairly mixed this past week as my Options Barometer came in at:
Monday – 5
Tuesday – 5
Thursday – 5
Friday – 5
Events for the Week to Come
The macro-economic schedule for this week will be fairly quiet other than PCE (inflation data on Friday), which means traders will be likely focused on the end of last week’s rotation out of AI/Semiconductors, and into the “other sectors” that have mostly languished for months.
On the earnings front, it will be a relatively quiet week, though traders will be watching for FedEx (FDX) on Tuesday, Micron (MU) on Wednesday, and Nike (NKE) on Thursday.
What Traders Are Saying
As the market has moved higher, Wall Street firms have been aggressively raising their 2024 S&P targets. Yet as @NicholasABrown shared on Twitter/X, many of those analysts’ latest price target revisions are still below the closing price for the SPX on Friday (5464).
As I’ve written in the past, I think predicting where the market will end the year is a fool’s game, as who knows what will happen in the world and the economy over a twelve-month time frame. But that doesn’t mean it’s not entertaining to see which of the best and brightest guessed best, even when they get to revise their numbers throughout the year (deep eye roll).
Open Positions
Cameco (CCJ) December 55 Calls – CCJ was mostly unchanged last week as material-type plays mostly chopped around. Option activity has gone quiet in CCJ as of late, though that can change very quickly in this uranium play.
Robinhood (HOOD) January 15/37 Bull Call Spread – HOOD bled back some of its recent gains last week as the recent best performers came under some pressure. Though on a positive note, HOOD bounced nicely on Friday from its early morning lows and finished the day nicely higher.
Hewlett Packard (HPE) January 22 Calls – On Thursday of last week, we added HPE to the portfolio after weeks of strong stock performance and bullish option activity. Unfortunately, the stock pulled back some on Friday, but this small pullback is not yet a concern as we are holding January calls.
Lyft (LYFT) Stock – The LYFT June 16 calls that we are short expired worthless on Friday. This is good, though the stock’s decline since the company updated their guidance is not great. Regardless, I will be looking to sell a new set of calls in the days to come.
Marijuana ETF (MSOS) Stock – The MSOS June 10 calls that we sold expired worthless on Friday. I will be looking to sell a new call in the days/weeks to come, hopefully on a stock rally.
Novo Nordisk (NVO) September 135 Calls – NVO mostly chopped around last week, which is fine, though we do need the stock to really bust out for our calls to go from good to great.
On Holding (ONON) January 42.5 Calls – ONON had been moving violently day to day but then had a not-so-great day on Friday. This isn’t terribly surprising as the sellers went after the stocks with meat on the bone to end last week. Let’s see if this selling continues or if it was a temporary “fad.”
Palantir (PLTR) June 22 Covered Call – PLTR closed Friday at 23.85, which means our covered call is now closed, and we walked away with a profit of slightly more than 11%.
Of note, if PLTR were to pull back, we might get right back into a position.
Taiwan Semiconductor (TSM) September 130/190 Bull Call Spread – After making yet another new high on Thursday, TSM pulled back a hair from those highs, along with its AI/Semiconductor peers.
Stepping back, the stock looks amazing and option activity remains red hot.
Nasdaq ETF (QQQ) November 430 Puts – The QQQs had their first “bad” week in quite some time, and just in case this is the start of a real pullback (I somewhat doubt it), we will continue to hold our hedge.
Walmart (WMT) January 65 Calls – WMT continues to look fantastic as the stock broke out to a new high on Friday. Option activity remains strong, and our calls are now at a potential gain of approximately 50%.
Wells Fargo (WFC) December 62.5 Calls – WFC bounced last week as “everything else” outside of AI rallied to close the week. And while the small rally is nice, we need WFC back to the 61/62 level before I can get too excited about a real rally.
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