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Week of October 30, 2023

There is no sugar coating it, the market had a very bad week as the S&P 500 fell 2.5%, the Dow lost 2.14% and the Nasdaq declined by 2.6%.

November 3, 2023
Position Update – DraftKings (DKNG) Earnings

DraftKings (DKNG) reported earnings yesterday afternoon that blew away expectations. In response to those earnings, and potentially an improving market, DKNG stock is trading higher by 17% today.

This is a positive situation for our remaining DKNG position that is now at a potential profit of approximately 120%.

I am going to continue to hold my position as is looking for greater gains. However if you would prefer to lock in your profits, that is a fine choice as well.

November 2, 2023
DraftKings (DKNG) Earnings

Today, after the close, DraftKings (DKNG) will report earnings. Headed into the event, we are holding a third of a position, having taken partial profits twice.

I am going to hold my position through the earnings event as we have profits in the bank, and option activity has been strong recently, including this trade from earlier in the week:

Tuesday - Buyer of 12,000 November 30 Calls for $0.86 – Stock at 26.7

That being said, earnings season has been a total toss-up this week as some stocks have exploded higher (ROKU, SHOP, PLTR) while others have imploded (CFLT, RELY). Because of that risk, if you want to reduce your exposure, you must sell your position before the close of trade today.

DKNG - With the stock trading at 28.5, the options market is pricing in a move of $2.75 this week, or 25.75 to the downside and 31.25 to the upside.
Open interest is skewed slightly bullish on a ratio of 1.2:1 call vs. put.
Skew is pricing in typical downside risk as well as upside interest.

November 1, 2023
Positions Update – Cameco (CCJ)

As we await the Federal Reserve announcement later this afternoon (virtually no chance of an interest rate hike), and more importantly the Fed Chair’s press conference that will follow, I wanted to update you on our Cameco (CCJ) position.

Cameco reported earnings yesterday that easily beat expectations. In reaction to those numbers, CCJ stock gained 8% yesterday and is higher by another 0.5% today, and is again approaching its multi-month high. This is a good situation for our March 40 calls that are now at a potential profit of approximately 18%. I am going to continue to hold my position as is.

Stepping back to the market, the last three days the indexes have improved, which is good. Now let’s see how the market reacts to the Fed today (important), Apple earnings tomorrow (less important), and the October Jobs Report on Friday (somewhat important).

October 30, 2023
Positions Update – FRSH and CCJ

Please note, we are having issues with our texting function today. If you have not received your text to Sell FRSH stock, we are exiting that position today.

Also, in that text, the price given to sell the stock was “17.50 or more (approximately)”. Since this tech issue began FRSH stock has fallen marginally and is now below 17.50. I am going to sell even if the stock is below 17.5.


Moving on …

Cameco (CCJ) will report earnings tomorrow before the market open.

I am going to hold my position through earnings as option activity remains strong and the stock largely moves based on the price of Uranium, and not on earnings (though of course that is not a guarantee).

CCJ - With the stock trading at 37.5, the options market is pricing in a move of $2.75 this week, or 34.75 to the downside and 40.25 to the upside.
Open interest is skewed bullish on a ratio of 2:1 call vs. put.
Skew is pricing in typical downside risk and upside interest.

October 30, 2023
Weekly Update

There is no sugar coating it, the market had a very bad week as the S&P 500 fell 2.5%, the Dow lost 2.14% and the Nasdaq declined by 2.6%.

This week there are a handful of important earnings reports, a Federal Reserve meeting, the October Jobs Report, and much more. Buckle up!

Stocks on Watch

While last week was fairly ugly for the market there were some positive stock reactions to earnings amidst the index’s big declines. Here are a few of those stocks that responded well to posting quarterly results:


And while mega-cap tech stocks were hit hard last week, there were some large premium call buys throughout the week, noted below:

Monday - Buyer of 10,000 Nvidia (NVDA) December 380 Calls for $61.45 – Stock at 424

Monday - Buyer of 32,000 Tesla (TSLA) February 200 Calls for $34.75 – Stock at 215 (rolled from November calls)

Friday - Buyer of 150,000 Amazon (AMZN) February 115 Calls for $21 – Stock at 129 (rolled from November 120 calls).

I do want to point out that none of these call buys are looking for a quick market turnaround, and instead are targeting a rebound from December through February.

On the bearish side of the coin, as I’ve written several times in the last two months traders have been accumulating puts on the Airline stocks, which has been the right trade as the Jets ETF (JETS) is within 12% of its Covid lows. Yikes!

And on Friday traders continued to buy puts on airline stocks looking for further declines. Here are those trades:

Friday - Buyer of 4,500 JetBlue (JBLU) June 4 Puts for $0.80 – Stock at 4.10

Friday - Buyer of 6,000 Southwest Airlines (LUV) December 20 Puts for $0.51 – Stock at 22.3.

Truly ugly option activity and stock action!

Volatility and What Traders are Saying

This week I am going to combine the Volatility and What Traders are Saying sections. You will see why below …

The Chicago Board of Options Exchange Volatility Index (VIX) closed the week at 21.30, or mostly unchanged on the week.

Interestingly, despite the market continuing to fall, the VIX has not exploded higher. I have two theories why that may be the case.

First off, while the indexes have been falling it has hardly been a market crash. Instead, the S&P 500 has strung together several down 1-2% weeks, which over the course of two months adds up to an approximate 10-15% decline. Because of the relatively slow market fall it has not been a monster winner for put buyers and there has not yet been panic.

Secondly, I think that “everyone” is hedged. What I mean is this market pullback, while the bond market has gone haywire, has been slow and “obvious” enough that traders had time to buy puts. In fact, we have owned QQQ and XLF puts for the past two months.

That being said, should the Banks (XLF) continue to really unwind, or if mega-caps (AAPL/GOOGL/NVDA) truly get destroyed, I can promise you that the VIX will in fact explode higher.

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

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

Events for the Week to Come

Just in case the last two weeks haven’t been bumpy enough, this week is one of the most packed weeks of potential market-moving events in quite some time.

The headliner this week will be the Federal Reserve announcement on Wednesday. And while there is virtually zero chance of a hike, as always, the Fed Chair’s press conference could cause volatility. Then, just two days later on Friday, we will get the October Jobs Report.

And if that isn’t enough, approximately 15-20% of the S&P 500 will report earnings this week, including Apple (AAPL) on Thursday.


Open Positions

Cameco (CCJ) March 40 Calls – CCJ was mostly unchanged last week, continues to look good and traders never stop buying calls, including this trade from Thursday:

Buyer of 2,000 Cameco (CCJ) November 40 Calls (exp. 11/3) for $1 – Stock at 38.5.

Cleveland-Cliffs (CLF) November 15 Covered Call – Following earnings CLF gained 10% last week, closing at 16, or $1 above our short strike price. This trade is working well.

DraftKings (DKNG) January 25 Call – DKNG “only” lost 1.5% last week, though big picture it continues to chop around with the market. The company will report earnings on Thursday.

Of note, last week Wall Street firm Moffett Nathanson raised the stock to Outperform with a price target of 37.

Freshworks (FRSH) Stock – We have not yet made a move on our existing FRSH stock position. The company will report earnings tomorrow after the close so I will 100% be acting on this trade today/tomorrow.

Intel (INTC) January 34 Call – Well, I sold a piece of INTC at the short-term bottom! Earnings season!

Regardless, fortunately we are still holding a third of a position as the stock gained 9% Friday.

Li Auto (LI) June 40 Call – LI gained 10% last week, which was interestingly timed as a trader Monday bought three large call positions listed below:

Buyer of 8,000 Li Auto (LI) January 27 Calls (exp. 2025) for $11.65 – Stock at 32.5 (rolled back from January 40 calls)

Buyer of 8,000 Li Auto (LI) January 30 Calls (exp. 2025) for $10.25 – Stock at 32.5 (rolled back from January 35 calls)

Buyer of 3,000 Li Auto (LI) December 33 Calls for $2.70 – Stock at 32.5.

Nasdaq ETF (QQQ) December 370 Puts – For better or worse our QQQ puts continue to explode in value as our hedge is offsetting some of the weakness in our bullish positions.

Nutanix (NTNX) April 37.5 Calls – NTNX fell 3% along with its hyper-growth stock peers. Not much more to add other than this stock will likely move in lockstep with the growth sector.

TJX (TJX) April 92.5 Calls – TJX fell 2% last week, though it continues to look mostly fine. Not much more to add, other than we want this stock to get moving higher.

Financials ETF (XLF) March 33 PutWhile many of our stocks look mostly fine, the XLF looks horrible, which is good for our put position that I will continue to hold just in case we are on the verge of a real market fall.

Energy ETF (XLE) January 85 Calls – The XLE fell 5.5% last week which is not great for our final third of a position. Fortunately we sold another piece of our position near the top two weeks ago.

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.