January 12, 2024
Stock on Watch – UBER
Traditionally one of the best signs for the market in my opinion is when my potential buy list based on stock strength, as well as option activity, continues to expand. Especially when that list is full of stocks from important sectors.
For example, as I wrote yesterday, I’m very intrigued by Marvell (MRVL) as the stock is breaking out to new highs and call buying has been strong. And in terms of the market, it is always encouraging to see the semiconductors performing well.
And today, I am adding Uber (UBER) to my watch list as the stock is at a new 52-week high and the last two days traders have been buying calls. Here are those trades:
Yesterday - Buyer of 8,000 Uber (UBER) June 70 Calls for $4.40 – Stock at 63.5
Today - Buyer of 8,000 Uber (UBER) June 70 Calls for $4.60 – Stock at 64
Today - Buyer of 4,000 Uber (UBER) June 65 Calls (exp. 2025) for $13.10 – Stock at 64 (rolled from January calls).
I think UBER looks terrific, and much like MRVL, the stock is at the top of my watch list.
January 11, 2024
Stock on Watch – Marvell Technology (MRVL)
With just over one week until our Intel (INTC) call expires, I am again open to adding a new semiconductor play to the portfolio. This brings me to Marvell Technology (MRVL), which is trading at a multi-month high today and is attracting very bullish option activity, including:
Buyer of 12,000 Marvell (MRVL) February 70 Calls for $1.20 – Stock at 64.5
Buyer of 18,000 Marvell (MRVL) April 65 Calls for $6.20 – Stock at 64.75
I like the look of MRVL stock a lot, and this option activity, along with quite a few shorter-dated upside call buys, is very intriguing.
Very quickly MRVL is at the top of my watchlist for a new position.
January 9, 2024
How to Cheat “Better”
Let me start here, I do not encourage anyone to trade on insider information. However …
Yesterday afternoon a trader executed this trade in Juniper (JNPR), just hours before the Wall Street Journal reported that Hewlett Packard (HPQ) is nearing a deal to buy Juniper:
Buyer of 1,000 Juniper (JNPR) April 33 Calls for $0.55 – Stock at 30
In reaction to the potential takeover news JNPR stock is trading higher by 26% at 37, and the 1,000 April 33 calls are now worth $5, or a potential profit of $445,000. Not a bad profit, but not exactly how I would have done it if I was going to trade on insider information and maximize my profits.
If it were me, I would have bought at-the-money options (the 30 strike) and an expiration cycle closer to the current day (January).
For example, yesterday the January 30 calls were trading at $0.55, or the same price the April 33 call buyer paid.
Fast forward to today, and those January 30 calls are now worth $7, or what would have been a profit of $645,000, which is $200,000 more of gains than the April calls.
Again, I’m not recommending trading on insider information, but instead just wanted to show you how to best maximize your potential gains if you have a feeling/hunch.
January 8, 2024
Scheduling Note
I just wanted to reach out with a quick note to let you know that due to the Martin Luther King Day holiday, all the option content that would normally be sent on Monday, January 15 will be sent on Tuesday, January 16. But, holiday aside, this is a totally normal stretch for me, so if there are any trades, stocks on watch, or anything else that needs your attention, you’ll receive an alert as usual.
January 8, 2024
Weekly Update
2024 got off to a somewhat rocky start as the S&P 500 fell 1.8%, the Dow lost 0.6% and the Nasdaq lost 3.5%. And while the indexes fell there is rarely much to learn from the first week of the year as this week is often “wonky” as traders rotate from one sector to the next, and tax-related trading can move money out of recent winners.
Let’s see how the market trades this week and next before making any dramatic moves to the portfolio.
Stocks on Watch
The top of my watch list for new positions is comprised of stocks I’ve written about recently (AMD, CELH, NVO), and I continue to really like all of them. Here are my thoughts:
AMD stock hasn’t given up an inch even as semiconductors and growth stocks fell last week. SUPER impressive action.
CELH stock was strong last week and call buyers continued to add positions looking for more upside, including this trade from Tuesday:
Tuesday - Buyer of 3,000 CELH January 60 Calls for $1.80 – Stock at 57.5.
NVO broke out to a new high on Thursday and into that strong stock action a trader bought these calls:
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.
Should the market strengthen, I could easily see us adding one, or even all, of the stocks above to the portfolio. (Of note, if I were to rank these stocks in terms of my interest, I would say AMD is number 1, NVO is number 2, and CELH is number 3. Though those rankings can change quickly.)
Volatility
The Chicago Board of Options Exchange Volatility Index (VIX) closed the week at 13.35, which in my mind is encouraging. What I mean is I could easily have seen the VIX back at 14-16 coming out of the holidays, and with the market under pressure. Instead, it drifted higher, but hardly screamed panic.
Option Order Flow was fairly mixed this past week as my Options Barometer came in at:
Tuesday – 4
Wednesday – 5
Thursday - 5
Friday – 6
Events for the Week to Come
After a somewhat “sleepy” couple of weeks of earnings announcements and stock-moving events, the next couple weeks will ramp up with activity in a big way. For example …
This week countless companies will present market-moving news via the ICR Retail Conference January 8-10 and the J.P. Morgan Healthcare Conference January 8-11. Essentially, ANYONE who is anyone in the retail and healthcare/biotech spaces will be reporting numbers at these events, and coming out of the JPM conference there are almost always big takeovers announced (three biotech/med-tech takeovers already this morning!).
In terms of earnings season, we get back in gear this week led by JPMorgan (JPM), Citigroup (C) and Wells Fargo (WFC) on Friday:
What Traders are Saying
Today in What Traders are Saying I wanted to address two totally unrelated Cabot Options Trader items. The first is how well stops have worked recently, and the second is a deeper look at my options barometer.
Let’s start with our mental stops on big winning positions …
With the big market run-up in late 2023 we had several calls move deep in-the-money and to big profits. And in a play to let those stocks run higher, I set mental stops on our CCJ, DKNG and INTC positions below the market. Essentially, I didn’t want to sell these positions, but at the same time I wanted to set a floor for how far I would let our calls fall.
Fast forward a couple weeks and both CCJ and DKNG did drip lower and our stops were hit. We stuck to those stops, and walked away from those positions with profits of 63% in the case of CCJ, 185% for DKNG in Cabot Options Trader, and 239% in for DNKG in Options Trader Pro.
So how have CCJ and DKNG performed since those stops were hit? Both have drifted lower and while both looks “OK,” they are trading at multi-month lows. These stops worked very well.
Though of note, even though we sold, I’m absolutely willing to get back into positions in those stocks if they shape up and option activity again heats up, which did in fact happen in DKNG on Thursday via this trade:
Thursday - Buyer of 18,000 DraftKings (DKNG) March 34 Calls for $3 – Stock at 33.
Moving on …
You will see in this morning’s daily Options Trader Watch List that I set my options barometer at a 6, which is bullish but not overwhelmingly so. And if you simply took a quick look at the list of bullish and bearish trades you would see eight bullish trades and just two bearish trades. So why only a 6 on the barometer? First, here are those trades:
Bullish Order Flow:
Buyer of 1,000 Sea (SE) March 40 Calls for $3.95 – Stock at 38
Buyer of 7,000 American Airlines (AAL) February 14 Calls for $0.58 – Stock at 13.5
Buyer of 10,000 Pacific Biosciences (PACB) September 12/17 Bull Call Spread for $0.95 – Stock at 9.25
Buyer of 5,000 TG Therapeutics (TGTX) January 19.5/27 Bull Call Spread for $1.50 – Stock at 19.25
Buyer of 3,000 Li Auto (LI) September 40 Calls for $4.35 – Stock at 34.35
Buyer of 2,500 Li Auto (LI) June 23 Calls for $12.45 – Stock at 34
Buyer of 10,000 Cleveland Cliffs (CLF) February 20 Calls for $0.83 – Stock at 19.25 (rolled from January calls)
Buyer of 800 ARM Holding (ARM) August 67.5 Calls for $9.80 – Stock at 67.
Bearish Order Flow:
Buyer of 6,000 JetBlue (JBLU) June 3.5 Puts for $0.40 – Stock at 5.50
Buyer of 2,200 Roblox (RBLX) February 37 Puts (exp. 2/23) for $1.49 – Stock at 42.
Essentially, when digging deeper into the bullish list there are no true market leaders on that list; there are two trades in one stock (LI), two random biotechs (PACB and TGTX) and then a smattering of other trades. Not exactly a bunch of call buying in stocks like NVDA, BAC, AAPL, etc., that would have me super bullish on the market.
Open Positions
Intel (INTC) January 34 Call – INTC came within millimeters of our stop last week before bouncing. We only have two weeks left with our calls that are now at a potential profit of approximately 250%.
Li Auto (LI) June 40 Call – Despite two bullish items below, LI stock continues to be under pressure along with its China peers. Let’s continue to be patient early in the new year with this position … for now. Here are those two bullish items:
Goldman Sachs starts LI with a Buy rating
Friday - Buyer of 2,500 Li Auto (LI) June 23 Calls for $12.45 – Stock at 34
Friday - Buyer of 3,000 Li Auto (LI) September 40 Calls for $4.35 – Stock at 34.35.
Nutanix (NTNX) April 37.5 Calls – NTNX fell marginally from its late-2023 highs last week as the previous year’s winners came under pressure. That being said, the stock looks terrific and our calls are in outstanding shape at a potential profit of approximately 125%.
Palantir (PLTR) April 19 Call – PLTR was under pressure again last week, and I’m starting to get a touch concerned about this position. That being said, the trading action last week to start the year, like most years, was a bit “funky,” so let’s see how PLTR trades this week and beyond.
Equal Weight ETF (RSP) June 158 Calls – The RSP fell marginally with the market last week, which is what we would expect when the indexes lose ground. Not much more to add.
Snap (SNAP) August 17 Calls – SNAP fell marginally last week, which is very encouraging as the stock could have gotten nailed along with its 2023 big winning stock peers. I continue to really like the look of this growth play. And of note, on Wednesday a trader bought this call position:
Wednesday - Buyer of 8,000 Snap (SNAP) February 17 Calls for $1.25 – Stock at 15.85.
TJX (TJX) April 92.5 Calls – TJX stock looks great, and it received two glowing reports for 2024 last week …
TJX named to Loop Capital’s 2024 Best Ideas List
TJX Argus’ Top 2024 pick
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.
