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Week of May 8, 2023

Despite a concerning start to the week for the bulls, Friday’s big rally provided some hope that the market could get back in gear. By week’s end the S&P 500 had lost 0.8%, the Dow had fallen 1.24%, and the Nasdaq had gained 0.07%.

May 10, 2023
Disney (DIS) Earnings

Disney (DIS) will report earnings today after the close. Heading into the event the stock has mostly chopped around for months, much like the market.

Because we have profits in the bank on a third of our position, I am going to hold my position through the event.

Here is what the options market is pricing in for the announcement:

DIS - With the stock trading at 101, the options market is pricing in a move of $6 this week, or 95 to the downside and 107 to the upside.

Open interest is skewed bullish on a ratio of 1.2:1 call vs. put.

Skew is pricing in typical downside risk and upside interest.

May 9, 2023

Stocks on Watch – UBER and META

Uber (UBER) and Meta (META) (formerly Facebook) were two of the hottest stocks in the market until the tech bubble burst in 2021, which sent both stocks into a tailspin along with their growth peers. In the months/year that followed, both former leaders mostly fell off the radar of investors.

Fast-forward to this year and these two fallen giants have re-emerged of sorts, as UBER is up 55% year to date, while META has risen 95%.

More recently both UBER and META stocks reacted very well to earnings, which put both stocks on my radar.

And of greater interest to me is the bullish option activity that followed these big stock moves higher, including:

Buyer of 1,100 Meta (META) January 350 Calls (exp. 2025) for $19.30 – Stock at 233

Buyer of 2,000 Meta (META) June 220 Calls for $20.15 – Stock at 234

Buyer of 12,000 Meta (META) May 240 Calls (exp. 5/12) for $1.03 – Stock at 235

Buyer of 14,000 Uber (UBER) June 40 Calls for $1.40 – Stock at 38.75

Buyer of 3,500 Uber (UBER) July 42.5 Calls for $1.07 – Stock at 38

Buyer of 2,700 Uber (UBER) May 36 Calls for $1.69 – Stock at 37

Buyer of 7,000 Uber (UBER) July 40 Calls for $0.95 – Stock at 35.5

Buyer of 5,000 Uber (UBER) July 45 Calls for $0.37 – Stock at 36.5

I really like both of these stocks as well as the option activity and could easily see adding one or even both should the market react well to tomorrow’s inflation data (UBER is probably the number one candidate).

May 8, 2023
Weekly Update

Despite a concerning start to the week for the bulls, Friday’s big rally provided some hope that the market could get back in gear. By week’s end the S&P 500 had lost 0.8%, the Dow had fallen 1.24%, and the Nasdaq had gained 0.07%.

Stocks on Watch

As I wrote on Friday, I have a growing list of earnings stars that I have interest in buying should the market finally break out of this several months long range. Here are my thoughts on these stocks on my radar.

Abbott Laboratories (ABT) and countless other med-tech/pharma plays have shown real signs of life in the last three weeks even as the market has chopped around. I’m interested in ABT, though also could see us getting involved with this space via a buy of the Biotech ETF (XBI) as well.

D.R. Horton (DHI) and its housing peers are another stock/sector that are performing well despite the market’s choppiness. This is counterintuitive as the housing market has frozen up as interest rates have risen. Hmmm.

Las Vegas Sands (LVS) broke out to a new high three weeks ago following earnings, and then continued to make highs early last week before pulling back marginally to close the week. We had great success with LVS earlier this year, and the stock is near the top of my watch list.

Despite technology stocks mostly flopping around, Spotify (SPOT) has been a steady riser, and two weeks ago the stock surged higher on earnings. I like the way SPOT has traded since the calendar flipped to 2023 (up 80% year-to-date).

Uber (UBER), UBER, UBER … will the third attempt at breaking out finally be the charm?!! The company reported a big earnings beat late last week, and the stock exploded higher by 22%. Maybe, just maybe, this will be the time the stock really gets in gear.

Somewhat similarly Shopify (SHOP) has been mostly range bound for the past three months. However, the stock exploded higher by 28% last week following earnings. SHOP was a monster winner for traders for many years before the stock imploded during the tech meltdown of 2021/2022. Perhaps investors are now back interested in this tech giant.

DraftKings (DKNG) was another bust story of the 2021/2022 tech meltdown. However, last week the stock broke out following a big earnings beat on Thursday that sent the stock higher by 15%. Option activity has been strong in DKNG for a while, and was again on Friday even after the big stock move.

Finally, as I’ve written recently, every once in a while I like to throw a trade in my back pocket. These are often longer-term call buys in beaten down stocks or sectors. And on Friday a trader executed a similar type of trade in Vornado (VNO) which is a REIT that is down 60% in the last year. Here is that trade:

Buyer of 2,000 Vornado (VNO) January 15 Calls (exp. 2025) for $3.60 – Stock at 14.

I kind of like that trade, though of note, VNO is at the epicenter of the REIT meltdown and the chart looks horrible.


The Chicago Board of Options Exchange Volatility Index (VIX) closed the week at 17.20 and remains in its recent range between 16-20, while the S&P 500 remains very range-bound itself.

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

Monday – 6
Tuesday – 3
Wednesday – 4
Thursday - 5
Friday – 5

Events for the Week to Come

After a wild week of trading largely focused on the strength/weakness of Regional Banks, traders will likely still be focused on this sector.

However, also of great importance this week are two inflation data points: the April Consumer Price Index (CPI) on Wednesday and Producer Price Index (PPI) on Thursday. Of note, following the Federal Reserve interest rate hike last week, traders are now pricing in a 10% chance of another hike at the June meeting.

On the earnings front the following companies will report this week, with the headliners being PayPal (PYPL) tonight, Airbnb (ABNB) Tuesday and Disney (DIS) on Wednesday.

Earnings 5/8/23

What Traders are Saying

Rumors on Friday and this weekend have been floating around that the SEC is contemplating a ban on short selling of bank stocks. Here are some thoughts on such a strategy:

During the financial crisis, short selling was temporarily banned in the U.S., although a New York Federal Reserve review later showed the curb did not achieve the intended effect.

In fact, as shared by @Stephen_Geiger on Twitter, “On Sep 19, 2008 the SEC banned shorting bank stocks. The market briefly rallied. After that… the S&P 500 fell 47% to the bottom.”

financial crisis

I remember the day that short selling was banned. It was NOT good for me!

Here are my recollections from that day, though because it was so long ago, or perhaps because it was so painful for me, I don’t remember all of the details.

I was the lead market maker in Bank of America (BAC) as well as a smaller bank stock (I think it was the now infamous Silicon Valley Bank (SIVB) though I don’t quite remember as trading in SIVB and other regional banks was mostly off my radar when compared to our massive BAC position).

As soon as the short selling ban took effect the bank stocks EXPLODED higher. Again, I can’t remember the exact details but a stock like BAC rallied $10 (approximately) and SIVB (if it was SIVB) ran higher by $50.

Our BAC position was fine. However, our SIVB position was a nightmare!

The crux of the issue was while our position was directionally neutral, we were short a ton of stock and long calls. This position was hedged … until the stock exploded higher. At that point we weren’t long enough calls to offset our short stock position.

So, with the stock higher by $50 (approximately) we were VERY, VERY short. Because of that, and not knowing when the stock would stop going higher, I was forced to buy stock higher by $50 on the day in order to re-hedge our position.

This stock buy was a disaster as the stock fell back to being mostly unchanged in the minutes that followed. Every share of stock I bought was horrible! Not a good day for Jacob and the team I managed!

Open Positions

Long positions: BABA, BAC, CLF, DIS, FTI, IWM
Bearish Positions: SPY

Alibaba (BABA) October 105 Call – BABA was down marginally last week, and big picture this trade is not working. I will either sell our calls or adjust this trade soon.

Bank of America (BAC) May 32 Covered Call – BAC fell with its financial peers last week as the regional bank mess continues to weigh on the sector. Of note, the May 32 call that we sold for $0.38 is now virtually worthless (good).

Cleveland-Cliffs (CLF) May 17 Covered Call – CLF and its commodity peers were hit last week, but rallied on Friday with the market. Of note, much like our BAC call above, the CLF May 17 call that we sold for $0.48 is now virtually worthless.

Disney (DIS) September 105/130 Bull Call Spread – DIS will report earnings on Wednesday. Expect a full write-up that day on what the options market is pricing in for the announcement.

TechnipFMC (FTI) May 14 Covered Call – FTI had a good week, led mostly by a strong move higher on Friday. This trade is working very well as the stock is now marginally above our short strike price.

Russell 2000 (IWM) August 177 Call – The IWM continues to mostly chop around, pulled lower by the regional banks on bad days, and rips higher on days those banks get in gear.

S&P 500 ETF (SPY) September 400 Put - The regional bank worries which shook the market early last week are exactly why we will continue to hold our SPY puts … for now.

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.