December 1, 2023
Position Update – Cameco (CCJ)
Really quickly I wanted to update you on our CCJ March 40 calls that are now approaching a potential profit of approximately 100%.
While I am going to continue to hold my position as is, I am going to set a mental stop on our calls. This is what I mean …
With the stock trading at 46.75, our March 40 calls are now worth $8.50.
Today I am going to set a mental stop at $7, which would likely trigger if CCJ stock were to fall to 44.5 (approximately).
This mental stop should protect us in case the stock falls, but will also not limit our upside potential with this trade should the stock continue to bust out to new all-time highs.
November 29, 2023
Nutanix (NTNX) Earnings
Nutanix (NTNX) will report earnings today after the close. Headed into the announcement we are holding the April 37.5 calls that are at a potential profit of approximately 45%.
I am going to continue to hold my position through the earnings announcement as the stock looks terrific (new high this morning) and the market continues to strengthen. Also, with partial profits in the bank on a third of our position I feel like we have some room to take risk.
That being said, should Nutanix’s earnings results miss expectations, it is likely the stock will fall. And for that reason, if you would prefer to not take the earnings risk, or want to lock in gains of 45% on another piece of your position, you must Sell to Close before the end of the trading day today.
NTNX - With the stock trading at 41.5, the options market is pricing in a move of $3 this MONTH, or 38.5 to the downside and 44.5 to the upside.
Open interest is skewed bullish on a ratio of 2.1:1 call vs. put.
Skew is pricing in typical downside risk and upside interest.
November 28, 2023
Stocks on Watch – Fintech (SQ/COIN/AFRM/PYPL)
The last month of trading action has been encouraging as virtually all sectors and stocks have participated in the rally. This includes the former hyper-growth stocks from the Fintech sector, which had been total train wrecks since the growth bubble burst in late 2021, but are perking up lately.
For example, stocks like SQ/COIN/AFRM/PYPL have been trading well since earnings and are attracting bullish option activity, including:
Today - Buyer of 2,000 SQ January 65 Calls for $2.26 – Stock at 61.5
Today - Buyer of 10,000 AFRM December 30 Calls (exp. 12/1) for $1.70 – Stock at 31
Today - Buyer of 6,000 AFRM December 31 Calls (exp. 12/1) for $1.20 – Stock at 31
Today - Buyer of 3,000 PYPL January 60 Calls for $1.65 – Stock at 57
Yesterday - Buyer of 9,000 COIN January 120 Calls for $13 – Stock at 119 (rolled up from January 105 calls)
This is a tough group to chase, especially COIN and AFRM which are highly volatile. That being said, I am intrigued by all of the stocks above, and should option activity continue to lean bullish we could get involved with a new position.
November 21, 2023
Nvidia (NVDA) Earnings
Today after the close, one of the “big boys” of the market, and really the flagbearer for the AI story, Nvidia (NVDA) will report earnings. While I would assume the company’s earnings are going to be ridiculously good, what will be more interesting to traders such as myself is the stock’s reaction to those earnings.
Here is what the options market is pricing in for earnings, as well as some ideas if you have some gamble in you (I am not executing these trades as I don’t see an “edge” in guessing where NVDA will trade).
NVDA - With the stock trading at 497.5, the options market is pricing in a move of $38 this week, or 459.5 to the downside and 535.5 to the upside.
Open interest is skewed bullish on a ratio of 1.3:1 call vs. put.
Skew is pricing in extreme downside risk and upside interest.
As noted above, the options market is pricing in big-time downside fear, as well as the potential for a large move higher. We often times see this in stocks that have made big moves in previous earnings reports (higher by 14% and 24% the last two earnings) as well as in controversial stocks (AI is the big play here).
If I wanted to take a speculative shot on NVDA earnings, here is how I might do it (I am NOT executing these trades)
Aggressively Bullish – Buy the NVDA November 500 Calls (exp. 11/24) for $18 (approximately). This option will go to zero in the blink of an eye if NVDA stock falls.
Aggressively Bearish – Buy the NVDA November 495 Put (exp. 11/24) for $18 (approximately). This option will go to zero in the blink of an eye if NVDA stock rises.
Bullish – Buy the NVDA March 500 Calls for $53 (approximately). If NVDA falls or doesn’t rise dramatically this call will lose money as option volatility declines).
Bearish – Buy the NVDA March 495 Put for $45 (approximately). If NVDA rises or doesn’t fall dramatically this put will lose money as option volatility declines).
Should be interesting!
November 20, 2023
Positions Update – Four Stocks Racing Higher (PLTR, INTC, DKNG, LI)
The recent bull run is continuing today as the S&P 500 is higher by 0.5% and the Nasdaq is up another 0.8%. This has helped push four of our stocks to new recent highs. Here is a quick update on each.
Palantir (PLTR) is now trading at 21.5, and our recently purchased April 19 calls are at a potential profit of approximately 50%. Option activity remains crazy strong.
Intel (INTC) is up another 1.7% today, and our January 34 calls are now at a potential profit of approximately 200%.
DraftKings (DKNG) stock is now approaching the 39 level, which means our position is at a potential profit of 230%.
And finally, Li Auto (LI) is trading at a multi-month high at 42, as China-related stocks have joined the party. After being down quite significantly on our trade, our LI calls are now at a profit of approximately 10%.
Stepping back, I would guess that the market will rest at some point as the recent run has been straight up. That being said, we are in a historically bullish time of year, and because of that, I am going to try to let these trades run for much greater gains.
That being said, I wanted to bring these stock moves and potential profits to your attention in case you wanted to ring the register on these trades.
November 20, 2023
Weekly Update
Before we dive into this morning’s Weekly Review, I wanted to bring to your attention to the schedule for this holiday week. I will be working/trading as normal Monday through Wednesday, and then will be off Thursday through Monday morning, which means we won’t be sending a Daily Watchlist or the Week in Review on Monday, November 27. Have a great Thanksgiving!
Also, I appeared on the Cabot Street Check podcast along with fellow Cabot analyst Mike Cintolo on Friday. Have a watch/listen for our thoughts on the market via this link:
Is the Bull Market Back? with Mike Cintolo and Jacob Mintz | Cabot Street Check
Moving on …
The bulls succeeding in pushing the market higher again last week as the S&P 500 gained 2.6%, the Dow rose by 2% and the Nasdaq rallied 2.45%. This week should be slow/quiet, though when there is a lack of liquidity in the market, you never know …
Stocks on Watch
Option activity swung bullish shortly after the calendar flipped from October to November, which was when the market started to run higher, and has continued to be very strong. And I’m not talking small buys in inconsequential stocks … take a look at the BIG premium call buys below from Wednesday and Thursday of last week:
Buyer of 35,000 Nvidia (NVDA) February 460 Calls for $65.65 – Stock at 492 (rolled from January calls) ($230 million call buy)
Buyer of 148,000 Amazon (AMZN) February 135 Calls for $15.20 – Stock at 143 (rolled up from February 115 calls)($225 million call buy)
Buyer of 36,000 Meta (META) February 300 Calls for $47 – Stock at 333 (rolled from February 250 calls)($169 million call buy)
Buyer of 13,000 Nvidia (NVDA) December 450 Calls for $52.70 – Stock at 489 (rolled up from December 380 calls)($68 million call buy)
Buyer of 31,500 Microsoft (MSFT) February 350 Calls for $36.12 – Stock at 373 (rolled up from February 300 calls)($113 million call buy).
Very interesting stuff as all the previous call buys, which were rolled out of in these stocks so the traders could buy new positions, turned out to be big winners.
Volatility
The Chicago Board of Options Exchange Volatility Index (VIX) closed the week at 13.8. As I talked about on the Cabot Street Check podcast, I think the low VIX is a great sign for the market. Though of note, because this is a holiday-shortened week, the VIX is a touch “artificially” low.
Option Order Flow was fairly bullish this past week as my Options Barometer came in at:
Monday – 5
Tuesday – 6
Wednesday – 6
Thursday - 6
Friday – 5
Events for the Week to Come
Please note, the stock market will be closed Thursday for Thanksgiving and will be open until 1 eastern on Friday. Have a great Thanksgiving!
On the earnings front, it will be a somewhat quiet week, though Nvidia (NVDA) reporting Tuesday afternoon could provide some fireworks:
What Traders are Saying
Last week in the “What Traders are Saying” section I wrote about how options “crack heads” often buy weekly calls in highly controversial stocks, like PLTR. Rarely do we see this wild call buying in more liquid stocks, as those are harder to get really big moves that would make this call buying worthwhile. However …
Last week, the call buying in Intel (INTC) was explosive – especially on Thursday, when call volume was 705% greater than average, as noted below (513k calls traded vs. an average of 72k).
Here is just a SMALL sample of that call buying from last week targeting short-term options:
Tuesday - Buyer of 8,000 Intel (INTC) November 40 Calls (exp. 11/24) for $0.34 – Stock at 39
Wednesday - Buyer of 10,000 Intel (INTC) November 42 Calls (exp. 11/24) for $0.29 – Stock at 40.75 (rolled up from November 40 calls)
Thursday - Buyer of 12,000 Intel (INTC) December 43 Calls for $1 – Stock at 42
Thursday - Buyer of 10,000 Intel (INTC) December 44 Calls for $1.30 – Stock at 43.
This call buying followed a nice run higher in the stock all year (up 65% year-to-date) and an upgrade Thursday morning from Wall Street firm Mizuho. Here are some of the notes from that upgrade:
“We downgraded INTC in Oct-2021 at ~$56 because we saw INTC lose focus from its core Data Center/Compute roadmap. We now see INTC refocused on a better 2024E DC/PC roadmap, which could drive DC/PC share gains and improve margins.” Ups to Buy, $50 target.
What makes this stock performance, option activity and upgrades so interesting is INTC came into the year as one of the least liked stocks on Wall Street. As shown by Bloomberg (below), INTC stock had more sell ratings headed into the year than any other Nasdaq 100 member.
Regardless, INTC stock gained 14.5% on the week, and our calls are now at a potential profit of approximately 170%.
Open Positions
Cameco (CCJ) March 40 Calls – On Friday we locked in a profit of 63% on another piece of our CCJ calls. While option activity has been red hot in CCJ (noted below), I have to stick to the system and lock in gains at predetermined levels.
Tuesday - Buyer of 15,000 Cameco (CCJ) December 50 Calls (exp. 12/29) for $0.55 – Stock at 43.8
Wednesday - Buyer of 5,000 Cameco (CCJ) December 50 Calls (exp. 12/29) for $0.49 – Stock at 43.25
Thursday - Buyer of 5,000 Cameco (CCJ) December 50 Calls (exp. 12/29) for $0.46 – Stock at 43.25.
DraftKings (DKNG) January 25 Call – DKNG gained another 10% last week and closed at a new high. Our calls are now at a potential profit of 222%
Intel (INTC) January 34 Call – See “What Traders are Saying”, above.
Li Auto (LI) June 40 Call – LI rose by 11% last week, and looks great. Of note, the company on Friday said it will start mass production and delivery of its first pure electric car in February.
Also on Wednesday a trader bought 1,500 Li Auto (LI) January 45 Calls (exp. 2025) for $8.80 – Stock at 41, and …
On Friday there was a buyer of 2,000 Li Auto (LI) January 27 Calls (exp. 2025) for $15.90 – Stock at 38.5.
Nasdaq ETF (QQQ) December 370 Puts – While I think owning puts in the portfolio is important, our December puts were running out of time and decay was going to be a big issue in the days/weeks to come, so we sold the last piece for a loss. Though of note, when we sold, we also set mental stops on our DKNG and INTC positions that are at potential profits of over 100%.
Nutanix (NTNX) April 37.5 Calls – NTNX was “only” up 1% last week. Not much more to add as the stock has somewhat stalled near its 52-week high (totally normal action in my opinion).
Palantir (PLTR) April 19 Call – After bumping into the 20 level for two weeks PLTR finally busted out, and closed at a new recent high of 20.5 on Friday. Our calls are now at a potential profit of approximately 30%.
Of note, option activity remains red hot in the stock including a buyer Tuesday of 5,000 Palantir (PLTR) December 21 Calls (exp. 12/1) for $0.56 – Stock at 20.
TJX (TJX) April 92.5 Calls – TJX was the dud of the week as the stock fell marginally on earnings. Let’s see if the stock gets back in gear during the next month as holiday sales could be a monster driver of stock performance.
Financials ETF (XLF) March 33 Put – The XLF is now our lone bearish position in the portfolio and I will continue to hold it just in case the market unwinds again.
Energy ETF (XLE) January 85 Calls – The XLE gained 1.5% last week, though big picture it hasn’t been ramping higher with the rest of the market. Because we have such big profits in the bank on two-thirds of the position I’m willing to give this trade a bit more time.
