May 23, 2025
Stock on Watch – CSX (CSX)
As a reminder, Monday, May 26, is Memorial Day, so Monday’s normal updates will be sent on Tuesday, May 27.
The last two days, a trader has been building a very large call position in CSX (CSX). Here are those trades:
Today - Buyer of 30,000 CSX (CSX) January 35 Calls for $1.20 – Stock at 30.5
Yesterday - Buyer of 45,000 CSX (CSX) January 35 Calls for $0.95 – Stock at 30.5
This is an interesting situation …
On the one hand, CSX stock looks decent but is hardly setting the world on fire.
On the other hand, this call buying is definitely something.
For now, my plan is to continue to watch CSX.
That being said, if I were to get involved at some point in the future, I want to note it would not be with calls $4.50 out of the money and instead would likely target the 30 or 32.5 strikes.
May 19, 2025
Weekly Update
*Note: Your next issue of Cabot Options Trader will arrive next Tuesday, May 27 due to the market holiday next Monday, May 26 in observance of Memorial Day.
Sparked by positive trade developments, the stock market raced higher last week as the S&P 500 rallied 5%, the Dow gained 3.4%, and the Nasdaq added 6%.
Stocks on Watch and What Traders are Saying
Having bought UBER last week, I was also “flirting” with the idea of buying the Roundhill Magnificent 7 ETF (MAGS) for the portfolio as well following this call buying activity on Wednesday:
Buyer of 10,000 Microsoft (MSFT) December 485 Calls for $20 – Stock at 448
Buyer of 31,000 Amazon (AMZN) August 200 Calls for $21.40 – Stock at 211 (rolled up from August 180 calls)
Buyer of 33,000 Tesla (TSLA) August 380 Calls for $32 – Stock at 343 (rolled up from August 290 calls)
Buyer of 1,000 Google (GOOG) May 167.5 Calls for $0.94 – Stock at 165.
However, what held me back from this buy is I dug into the ETF a bit more and found something that I don’t truly love about it. But first here is the description of the ETF:
The fund is an actively managed exchange-traded fund (“ETF”) that seeks to achieve its investment objective through its investment exposure to the companies comprising the “Magnificent Seven,” a group of seven companies commonly recognized for their market dominance in technological innovation.
Now, what I didn’t love about the ETF is the following:
MAGS uses total return swaps to gain exposure to the Magnificent Seven stocks (Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla) without holding the individual stocks directly. This allows the fund to manage its diversification and free up capital for other investments.
Essentially, Roundhill doesn’t actually have to own the Mag. 7 stocks and instead likely uses return swaps to get exposure to those stocks via deals with other institutions. This brings in some added risk as those other institutions could fail, or the relationship with Roundhill could sour in some way (from what I understand).
Stepping back, I’m sure the way Roundhill has structured these return swaps is totally fine … though if there is even a 1-2% chance of something going sideways, I would prefer to get exposure to the group in a more “traditional” manner. Essentially, my thinking is trading in this market is hard enough, and I don’t need to add even more risk.
In terms of other stocks on my watchlist, I like:
GE seemingly makes new highs every day, and option activity has been bullish including these trades from last week:
Buyer of 3,000 General Electric (GE) August 250 Calls for $6.79 – Stock at 230
Buyer of 1,000 General Electric (GE) December 280 Calls for $6.60 – Stock at 230.
SCHW made a new 52-week high last week and attracted these call buys:
Buyer of 1,500 Charles Schwab (SCHW) June 90 Calls for $1.95 – Stock at 89
Buyer of 2,700 Charles Schwab (SCHW) June 85 Calls (exp. 2027) for $18.90 – Stock at 87
Buyer of 3,700 Charles Schwab (SCHW) June 85 Calls (exp. 2027) for $17 – Stock at 85.
CSCO rallied nicely on earnings and option activity was bullish headed into earnings and in the days that followed.
TOST busted out on earnings two weeks ago and then continued to move higher last week, out to a new 52-week high.
CPNG also responded well to earnings two weeks ago, rallied to a new 52-week high last week, and also saw this call buyer:
Buyer of 5,000 Coupang (CPNG) September 33 Calls for $0.68 – Stock at 27.5.
Volatility
The Chicago Board of Options Exchange Volatility Index (VIX) closed the week at 17.70. Holy smokes, this has been quite the dramatic fall for the fear index, which traded as high as 60 just over a month ago.
If you want to hear a bit more about my thoughts on the VIX, I joined the Cabot Street Check podcast on Friday. Here is the link: https://www.cabotwealth.com/cabot-street-check-podcast/the-buyers-are-back-heres-what-theyre-buying-cabot-street-check.
Option Order Flow was fairly bullish this past week as my Options Barometer came in at:
Monday – 5
Tuesday – 5
Wednesday – 6
Thursday - 6
Friday – 6
Events for the Week to Come
Please note, pre-market futures this morning are pointing to the market opening lower by approximately 1% following news Friday that Moody’s had downgraded the U.S.’s credit rating.
On the earnings front, it will be another busy week, as PANW, SNOW, HD, TGT, TJX, INTU, WDAY, ZM and more report quarterly results.
Open Positions
Freeport-McMoRan (FCX) November 43 Calls – FCX pulled back marginally last week following weeks of gains. Option activity was mostly quiet last week as money raced into growth stocks.
Grab Holdings (GRAB) January 5 Calls – GRAB finally got above the 5 level which has been a tough nut to crack. That being said, we need the stock well above 5 for our calls to truly ramp higher. Regardless, option activity remains very bullish.
Marvell (MRVL) June 115 Calls – With just one month to go until our MRVL calls expire, I have little hope that these calls will come back to life.
Financials ETF (XLF) June 50 Calls – The XLF looks great, though with time running out on our trade, I may bail on these calls and move the capital to a stock like SCHW, for example, with more time until expiration.
Starbucks (SBUX) January 110 Calls – SBUX rallied nicely last week, though we need the stock much higher for our calls to truly ramp in value. My patience is running thin with this trade.
Robinhood (HOOD) December 50 Calls – Last week we locked in a profit of 69% on the second piece of our trade. Of note, on Wednesday the stock was upgraded by Wall Street firm Needham, who noted:
“We continue to be impressed by HOOD’s product expansion. Not only has the company showed breadth in its product suite, but also depth as we believe HOOD will become more competitive within crypto specifically. Finally, we see more crypto specific roll-outs on the horizon--we would expect more asset listings in the US as well as possibly HOOD’s own chain or some variant of that. We believe these additions would materially increase HOOD’s product depth. We are raising our price target to 71.”
Uber (UBER) December 90 Calls – UBER is the newest addition to the portfolio following days/weeks of strong stock action and overwhelmingly bullish option activity. I really like this set-up if the market can remain in gear.
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