March 22, 2024
Stock on Watch – Cameco (CCJ)
Long-time Cabot Options Trader subscribers are familiar with Cameco (CCJ) as the stock was a nice winner for us in the last year, as we followed strong call buying activity into a position and rode the Uranium play higher.
Fast forward to today, and the stock has been under pressure for the past two months but is starting to turn higher again and attracted this call buy this morning:
Buyer of 5,000 Cameco (CCJ) May 45 Calls for $2.26 – Stock at 42.5
Call buyers in CCJ have a pretty strong track record for executing bullish positions and having the stock move higher. It’s certainly not a 100% success rate, but by my eye, it could be close to 70-80%.
That being said, because the stock is mostly “meh,” I am going to keep CCJ on the sidelines but will keep an eye on the stock for further call buying activity.
March 19, 2024
Stock on Watch – Time to Get Back Into MRVL?
Marvell (MRVL) is a stock very familiar to Cabot Options Traders as we recently owned a position that was very profitable for us, though we gave up some of those gains when the stock tanked on earnings three weeks ago.
Shortly after that earnings fall we exited our position, which proved to be the right move as the stock has now fallen from 86 pre-earnings to a low of 64 today. Ouch!
And even though the stock has been under steady pressure, call buyers are starting to get interested again in MRVL the last couple of days, and that activity is really picking up today via these trades:
Buyer of 17,000 Marvell (MRVL) April 70 Calls for $1.50 – Stock at 65
Buyer of 5,000 Marvell (MRVL) June 80 Calls for $2 – Stock at 65 (rolled back from June 92.5 calls).
Hmmm …
On the one hand, this call buying is super interesting, and the stock may be due to bounce.
However, on the other hand, MRVL stock looks terrible, especially when compared to its Semiconductor peers.
My plan for now is to keep an eye out for further call buying activity. And even though I think the stock looks fairly dreadful, should these bullish trades continue to build, we could get back involved with MRVL.
March 18, 2024
It was another slippery week for the market as the sector rotation and trader narratives seemed to swing violently day-to-day. By week’s end the S&P 500 and Dow were marginally lower, while the Nasdaq fell 0.76%.
Stocks on Watch
In terms of intriguing option activity, it was a fairly quiet week. Though I would say the leader in terms of steadiest bullish option activity was Freeport McMoRan (FCX), which attracted quite a few bullish trades nearly every day, including:
Thursday – Buyer of 4,000 Freeport McMoRan (FCX) May 45 Calls for $2.07 – Stock at 43.2.
Copper and commodity stocks have perked up recently as the interest rate narrative has transitioned from five to six interest rate cuts this year to two or less (maybe even zero).
In terms of best-looking stocks that caught my attention last week, I am always intrigued when a mega-cap stock makes a big move, and that is exactly what Oracle (ORCL) did after the company reported a blowout earnings report on Monday. Essentially, a stock like ORCL rallying 12% is a monster move which leads me to believe the big boys of the market want in.
I have my eye on option activity in ORCL to see if traders are betting this stock is going to continue to move higher, though for now I have not seen truly overwhelming bullish activity.
Volatility
The Chicago Board of Options Exchange Volatility Index (VIX) closed the week at 14.75, or mostly unchanged on the week.
Of note, option activity was uninspiring all week. This is not terribly shocking as the S&P 500 has mostly slowly grinded higher, and the Nasdaq hasn’t really made any progress in three weeks.
Option Order Flow was mixed this past week as my Options Barometer came in at:
Monday – 5
Tuesday – 5
Wednesday – 5
Thursday - 5
Friday – 5
Events for the Week to Come
This week will be all about the Federal Reserve meeting on Wednesday. While no move in terms of interest rates is expected, traders will be closely listening for hints as to what the central bank thinks about recent inflation data that has been stickier/hotter than most expected.
On the earnings front it will be a somewhat quiet week, though traders will be watching Micron (MU) on Wednesday, and Nike (NKE), Lululemon (LULU) and FedEx (FDX) on Thursday.
What Traders are Saying
I’m not sure I’ve had a more ringing endorsement of my system to follow unusual option activity, and option activity in general for market trends, than what Goldman Sachs wrote last week:
“For the first time since 2021, options volume now surpasses shares volume in U.S. single stocks. This volume is most influential in a select group of 20-30 stocks; we believe it is critical to monitor flows in the options market when trading these stocks. The options market provides rich detail on investor expectations for upcoming catalysts, expected volatility, directional skew and broad attention being paid to a stock by individual investors and hedge funds.”
That’s exactly what I’ve been preaching for the past 20 years.
With that in mind, what is the options market telling me as of late for the market?
All of a sudden, it’s gotten very quiet in the options world, especially when it comes to the big boys in tech, which isn’t terribly surprising given the big run so far this year. Essentially, a breather for the market, or at least some choppy action, wouldn’t be surprising to me.
In terms of the VIX, the days of the VIX at 12-13 seem to be a thing of the past as the “fear index” has been creeping higher lately, mostly trading in the 14-16 range. This doesn’t have me too concerned yet, though it is something I am watching.
Finally, the easiest way to get a feel for the options market, which Goldman highlighted above, is to simply look at where my Options Barometer lands each day. To refresh:
Barometer reading of 1-4 for a couple days means “Worry”
Barometer reading of 4-6 for a couple days is “Neutral”
Barometer reading of 6-10 consistently is “Bullish”.
Open Positions
Celsius (CELH) July 60/95 Bull Call Spread – After hitting a new high early on Thursday CELH gave back a couple percent of gains later that day and Friday. However, by week’s end the stock had gained 5.5% and our position is now at a potential gain of approximately 235%.
Robinhood (HOOD) January 15 Call – HOOD gained another 7.2% last week and option activity remains red hot. Our calls are now at a potential gain of approximately 125%.
Novo Nordisk (NVO) September 135 Calls – On Tuesday of last week we exited our TJX and MRVL positions and moved some of that capital into NVO calls. In the days that followed NVO fell marginally, but option activity remained red hot, including this trade from Wednesday:
Buyer of 1,000 Novo Nordisk (NVO) September 140 Calls for $11 – Stock at 133.5.
Palantir (PLTR) April 19 Call – PLTR, and many AI plays, finally came under some pressure last week as the stock fell 9%. The daily rotation for AI stocks and all sectors has been fierce as of late, though because we have big profits in the bank, I’m willing to be patient with these swings.
Permian Resources (PR) April 15 Covered Call – PR gained 5% last week and looks great. Our covered call is now $1 in-the-money, which is nearly perfect. Of note, we will be collecting the $0.05 dividend when it is paid in the coming weeks.
Equal Weight ETF (RSP) June 158 Calls – The RSP was unchanged last week, along with the overall market. Not much more to add as this is a way to get bullish exposure to the market without the overweighting in mega-cap technology stocks.
Snap (SNAP) August 17 Calls – Despite headlines that our friends in Washington, D.C. are going to go after SNAP’s peer/rival TikTok, SNAP stock fell 8% last week. This stock is kind of terrible and is next on the chopping block unless it can turn around.
Taiwan Semiconductor (TSM) September 130 Calls – TSM finally came under some pressure last week along with its Semiconductor/AI peers. That being said, the stock looks terrific and option activity remains strong, including this trade from Monday:
Buyer of 5,500 Taiwan Semiconductor (TSM) May 150 Calls for $9 – Stock at 142.
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