January 4, 2024
Stock on Watch – Novo Nordisk (NVO)
While Eli Lilly (LLY) is the shining star in the GLP-1 weight loss story, a bit further down the movie billing is Novo Nordisk (NVO) whose stock is up 55% in the last year on similar hope/excitement regarding a breakthrough in weight loss.
And this morning, as NVO stock breaks out to a new high, a trader/traders have been adding call positions looking for greater gains in the months to come. Here are those trades:
Buyer of 4,000 NVO February 110 Calls for $3.40 – Stock at 106
Buyer of 600 NVO June 130 Calls for $2.30 – Stock at 106
It’s hard not to be impressed by the price action in NVO stock the last year, and this option action is definitely intriguing. Though as I wrote on Tuesday, it is so hard to trust the wild stock and sector rotations early in the year.
That being said, NVO is definitely on my watchlist for a new position.
January 2, 2024
Market Update and a Stock on Watch
Having taken a couple days off to end the year I am back at the trading desk today, and all Cabot Options Trader/Options Trader Pro emails and services are back up and running.
Speaking of up and running, or perhaps falling, the Nasdaq is trading lower by 1.5% in early trade today, largely led by declines in AAPL (lower by 3% on a downgrade) and the Semiconductors (down 2.75%).
Conversely, sectors like Healthcare (XLV) and Consumer Staples (XLP) are higher by 1.75% and 1%, respectively.
Essentially, we are seeing some of the typical start-of-the-new-year rotations from one sector to another which may hold, or for all we know might reverse tomorrow. What I mean is don’t take the first couple of days of the new year’s trading action to be the best signal for the full year’s performance.
That being said, there is the possibility that the strength in Healthcare and Consumer Staples noted above has some room to run. And in fact, call buying this morning in Pfizer (PFE) and Celsius (CELH) may point to further gains for those stocks and sectors. Here are those trades:
Buyer of 12,000 Pfizer (PFE) January 30 Calls for $0.80 – Stock at 30
Buyer of 3,000 Celsius (CELH) January 60 Calls for $1.80 – Stock at 57.5.
I’m fairly interested in both of those stocks, as they shaped up nicely in the last couple of weeks and this call buying is intriguing.
Again, let’s be patient with new buys right now as the first couple days of the year can be tricky, but if this call buying continues, I could see us adding one, or both, of the stocks noted above.
December 26, 2023
Position Update and Two Stocks on Watch
Really quickly I wanted to update you that Intel (INTC) is trading higher by another 5% today and has crossed the $50 stock level, which has propelled our call position above the 300% profit level (approximately 340%). I am going to continue to hold my position as the stock looks terrific and option activity remains very strong, including this trade from earlier this morning:
Buyer of 4,000 Intel (INTC) February 52 Calls (exp. 2/2) for $2 – Stock at 50
So, what might be the next unloved turnaround story for 2024, much like INTC was for us this year?
While NOT sexy, and both stocks look awful, Pfizer (PFE) and AT&T (T) have been DOGS for years … however, both have attracted call buying including:
Today - Buyer of 6,500 AT&T (T) February 16.5 Calls (exp. 2/2) for $0.50 – Stock at 16.5
12/20 - Buyer of 5,000 Pfizer (PFE) February 26 Calls for $2.35 – Stock at 28
I hate dumpster diving in broken stocks; though if you catch an INTC, it more than makes up for failed attempts at buying dips.
I will keep an eye out for further call buying in PFE and T in the days to come.
December 26, 2023
Weekly Update
Despite an ugly day for the market on Wednesday, the buyers again bought the dip, and as of the close Friday, the S&P 500 is now approximately 1% from all-time highs. For the week, the S&P 500 gained 0.57%, and the Dow and Nasdaq rallied approximately 0.2%.
Stocks on Watch and What Traders Are Saying
This week I’m combining the Stocks on Watch and What Traders Are Saying sections together, and you will see why below:
On Friday I again raised our mental stop on our INTC January 34 calls as we have three weeks until our calls expire. And because the calls are so deep in the money, and with so little time until expiration, these calls are moving one for one with the stock. Essentially should INTC stock fall, these calls will fall at the same rate of change.
Trust me, I’m not trying to get stopped out of INTC … this is essentially a risk management move.
With that in mind, should INTC fall and we get stopped out, or even if the stock continues to move higher, but time runs out on our January calls, I may be looking to add a new semiconductor to the portfolio, which brings me to …
I like the look of Advanced Micro Devices (AMD) a lot, and option activity has been red hot since the company announced a competitive AI chip to Nvidia (NVDA).
However, AMD stock is nuts, as it regularly moves 3-5% a day, so a call buy would have many ups and downs and would not be for the faint of heart. And while there is risk, since the new chip announcement, Wall Street has been ramping up their forecasts for AMD, and should this stock really get in gear, it has the potential to be a monster much like NVDA was in 2023.
Next up is ARM Holding (ARM), which has been on a slow but steady move higher in the last two months, and very impressively, even on the rare days that the market or semiconductors are weak, ARM hardly flinches. And while ARM’s option liquidity may be an issue for the buying power of the Cabot Options Trader subscriber group (might be a Jacob’s Private Circle type of stock), I did want to put this under the radar semi-conductor on your radar if you are looking for stock ideas.
And finally, if/when we get taken out of INTC, it’s possible we will jump right back into a position. The stock has been under-owned by Wall Street for many years, which is part of the reason we got into a position, and even as the stock makes new highs, every single day, traders continue to pile into upside calls. This is a turnaround story that may have more room to run.
Volatility
The Chicago Board of Options Exchange Volatility Index (VIX) closed the week at 13, which was actually “much higher” than I would have anticipated headed into back-to-back long weekends the next two weeks. What I mean is I could easily have seen the VIX at 12 or below.
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 – 5
Events for the Week to Come
As a reminder, I am going to be at the trading desk today. Then, tomorrow through the final weekend of 2023, we will be traveling and celebrating the holidays with family and friends. And while I will be away from the trading desk later this week, as always, I will have my eye on the market and will react if we need to make moves.
Moving on …
It will be a virtual silent week for the market in terms of earnings releases as there are literally zero of any consequence this week. Also, economic data will be slow as well, with the only highlights being the release of the Chicago Fed on Tuesday, Richmond Fed on Wednesday and Chicago PMI on Friday.
In theory, this should be a quiet week, though of note, when there is a lack of liquidity there is potential for big market moves.
Open Positions
Cameco (CCJ) March 40 Calls – On Tuesday of last week we closed the last piece of our CCJ calls for a profit of 43.82%. This trade worked very well as option activity tends to be right more times than wrong in CCJ. Because of that, I will continue to keep my eye on the stock and call buying moving forward.
Intel (INTC) January 34 Call – INTC is a total stock beast, and our calls are now at a potential profit of 273%. For more on INTC see Stocks on Watch and What Traders Are Saying above.
Li Auto (LI) June 40 Call – LI has been a mess lately along with most China stock plays … though, of note, the stock is trading higher by 8% this morning. Like I’ve said, let’s see how LI trades when the calendar flips to 2024.
Nutanix (NTNX) April 37.5 Calls – NTNX remains rock solid as the stock gained another 2% last week. At this point, our calls are now at a potential profit of approximately 145%.
Palantir (PLTR) April 19 Call – PLTR looks mostly fine, though big picture we would prefer to see the stock regain its momentum from last month.
Equal Weight ETF (RSP) June 158 Calls – The RSP gained 0.33% last week, largely in line with the overall market. As I’ve said, this is a bull market play that should work if the market moves higher in 2024.
Snap (SNAP) August 17 Calls – SNAP is the newest addition to the portfolio following weeks of strong stock action as well as bullish option activity. Of note, the call buying didn’t stop after we bought our position, including these trades from Thursday:
Buyer of 2,000 Snap (SNAP) February 20 Call (exp. 2/2) for $0.50 – Stock at 17
Buyer of 3,400 Snap (SNAP) March 21 Calls for $1 – Stock at 17.10
TJX (TJX) April 92.5 Calls – Very quietly TJX is once again approaching our calls’ strike price as the stock gained nearly 3% last week. I would expect the company will release holiday sales data in the coming days/weeks which will be a big driver of the stock.
Financials ETF (XLF) March 33 Put – At this point our XLF puts are largely a back-pocket hedge just in case something goes really sideways in the market.
