September 15, 2023
Position Updates – IONQ/CLF Expiration
Today is the expiration of our IONQ and CLF covered call positions. Here are my thoughts on each …
IONQ is now trading at 17, and it is very likely that the stock will close above our 15 strike this afternoon. Should that be the case the call that we sold will be exercised, which means we will be left without a stock or option position Monday, and we will walk away with a profit of 11.69% in just over one month’s time. Great trade!
CLF is trading at 14.5 this morning, and it is very likely that the September 16 call that we sold for $0.37 will expire worthless this afternoon. Come early next week, I will evaluate a potential new call to sell against our stock position.
September 13, 2023
Stock on Watch – Li Auto (LI)
While most Chinese stocks have been a disaster this year, somewhat quietly Li Auto (LI), which is an EV play, is higher by 98% year to date. And very recently, into a somewhat shallow pullback for the stock, call buyers have purchased longer-term, in-the-money calls looking for the stock to make a move higher next year. Here are those trades in the last three trading days:
Yesterday - Buyer of 2,000 Li Auto (LI) June 35 Calls for $11.60 – Stock at 40.75
Friday - Buyer of 3,000 Li Auto (LI) June 35 Calls for $10.70 – Stock at 39.5
Friday - Buyer of 1,000 Li Auto (LI) January 40 Calls (exp. 2025) for $11.30 – Stock at 39.5
I’m intrigued by the stock’s strength and option activity in LI. The only factor holding me back is the majority of Chinese stocks are mostly stuck in the mud.
That being said, should this option activity continue, I could see us jumping into a longer-dated position … though with a strike closer to the current stock price.
September 12, 2023
Position Update – INTC, XLE, UBER
Really quickly I wanted to update you on where our positions stand in three of our stocks/trades that are breaking out.
INTC is trading higher by another 2% today, and our position is now at a potential profit of approximately 90%. I am debating locking in profits on another piece of this position, but for now, I am going to hold on, as option activity remains red hot.
Similarly, the XLE is trading at a new high today, and our trade is now at a potential profit of approximately 90%. And much like INTC, I am going to hold my XLE position as the oil sector can get hot, and stay hot, for quite some time.
Finally, UBER is trading just short of its 52-week high, and our position is now at a potential profit of 115%. I am going to hold this trade as well as the news out of the company is great, and option activity remains strong.
While I am going to hold my positions, if you would prefer to ring the register on these trades, that is a fine choice as well.
September 11, 2023
Weekly Update
Partially aided by declines in mega-cap technology stocks Apple (AAPL) and Nvidia (NVDA), both of which lost 6% last week, the holiday-shortened week was not particularly kind to the bulls as the S&P 500 fell 1.3%, the Dow lost 0.75%, and the Nasdaq declined by 2% last week.
Stocks on Watch and What Traders are Saying
This week I’m combining the Stocks on Watch and What Traders are Saying sections as I wanted to note why I’m interested in some options trades and not others. Let’s dive in …
As I wrote on Thursday, I’m very intrigued by the option activity in Zoom Video (ZM), including these trades from late last week:
Thursday - Buyer of 2,000 Zoom (ZM) November 85 Calls for $1.85 – Stock at 74
Thursday - Buyer of 2,000 Zoom (ZM) November 90 Calls for $1.23 – Stock at 74.
I have ZM high on my watch list as the stock has been strong and so has the option activity. Though I would note, much like many stocks, ZM has started to lose some momentum/run into a brick wall the last couple of days, so for now I’m being patient with a buy recommendation (if it happens).
Next up is Nvidia (NVDA), which is the market darling, but last week the stock came under pressure, falling 6%. However, into that stock decline a trader bought calls almost exactly how I would execute a bullish trade in NVDA. Here is that trade:
Thursday - Buyer of 1,000 Nvidia (NVDA) February 450 Calls for $66.60 – Stock at 458.
What I like about this call buy is the trader is giving himself/herself time for the trade to work, as no one truly knows where the market is going in the next couple of days/weeks.
And finally, let’s take a look at some trades in former marijuana leading stock Canopy Growth (CGC) which had been a dumpster fire along with the sector, which has been crushed. However, in the last week marijuana stocks exploded higher following potentially good news, and a trader/traders bought calls late Friday afternoon looking for higher prices in CGC.
Friday - Buyer of 25,000 Canopy Growth (CGC) September 1 Calls for $0.13 – Stock at 0.95
Friday - Buyer of 7,000 Canopy Growth (CGC) October 1 Calls for $0.25 – Stock at 0.95.
I do NOT like these CGC trades, as there is so little upside to buying calls on a $1 stock when the stock is trading at $0.95. What I mean is if you want to buy the $1 strike calls so that you can exercise the calls and buy the stock at $1, why not just buy the stock for $0.95?
Essentially, buying CGC stock at $0.95 is a call option as there is limited downside, and unlimited upside, and because of that there is no reason to pay a call premium to do so.
Finally, I continue to watch NTNX, DELL and IOT, as these three companies recently reported strong earnings, the stocks responded well and have hardly given an inch since the initial move higher.
Volatility
The Chicago Board of Options Exchange Volatility Index (VIX) closed the week mostly unchanged at 13.87. Of note, the VIX as well as option activity by the major players was very quiet this week as traders slowly made their way back to the trading desks from the Labor Day holiday.
Option Order Flow was fairly mixed this past week as my Options Barometer came in at:
Tuesday – 5
Wednesday – 5
Thursday - 7
Friday – 5
Events for the Week to Come
This week should be fairly slow in terms of market-moving economic data, though traders will be paying attention to inflation Wednesday and Thursday when the Consumer Price Index (CPI) and Producer Price Index (PPI) are released.
On the earnings front it will be a very quiet week outside of Oracle (ORCL) reporting on Monday and Adobe (ADBE) on Thursday.
Open Positions
Cleveland-Cliffs (CLF) September 16 Covered Call – CLF fell 8% last week and unless the stock makes a dramatic move higher this week the September 16 call that we sold for $0.37 will expire worthless on Friday (totally fine scenario).
Of note, on Friday a trader bought 5,000 Cleveland Cliffs (CLF) November 17 Calls for $0.34 – Stock at 14.35.
DraftKings (DKNG) January 25 Call – Very quietly, DKNG has been on a nice little run, including a gain of another 7.5% last week. At this point our calls are at a potential profit of approximately 100%.
Freeport-McMoRan (FCX) January 44 Calls – Any momentum FCX had two weeks ago was again vanquished last week as commodity plays fell. My patience is starting to wear thin, though I do have to remember that this trade has some time until its expiration.
Freshworks (FRSH) October 22.5 Call – On Friday we added the FRSH October 22.5 covered call to the portfolio with a breakeven at 21.28. As I noted in the trade alert this trade is going to have its ups and downs; however, I like the risk/reward.
Intel (INTC) January 34 Call – The option activity in INTC remains red hot, and the stock looks terrific. At this point our calls are at a potential profit of 60%. Here is a small sample of the call buying last week:
Tuesday - Buyer of 6,000 Intel (INTC) October 40 Calls for $0.77 – Stock at 37
Tuesday - Buyer of 12,000 Intel (INTC) September 38 Calls (exp. 9/8) for $0.24 – Stock at 37.25
Thursday - Buyer of 3,000 Intel (INTC) September 37.5 Calls for $0.65 – Stock at 37.2
Thursday - Buyer of 2,000 Intel (INTC) November 38 Calls for $2.88 – Stock at 38.25
Friday - Buyer of 30,000 Intel (INTC) September 38.5 Calls for $0.60 – Stock at 38.1.
IonQ (IONQ) September 15 Covered Call – With just five days until expiration IONQ closed Friday at 19.35, which is more than $4 above our short strike. Essentially, it’s looking good for our covered call, though this stock is crazy, so anything is possible.
Nasdaq ETF (QQQ) December 370 Puts – The QQQ’s decline last week was good for our puts, though with a bullish portfolio that is not truly what we want. Such is the life of a “hedged” portfolio.
Shopify (SHOP) January 62 Call – SHOP fell 5% last week along with the Nasdaq and growth stocks. Not much more to add as this stock continues to trade with its peers and the market.
TJX (TJX) April 92.5 Calls – TJX fell 1% last week, though continues to look terrific. Option activity was fairly quiet in the stock, much like most in the holiday-shortened week.
UBER (UBER) December 40 Calls – UBER gained another 0.5% last week following a positive analyst day in which the CEO said, “We’re entering a phase where we’re increasingly thinking about returning capital to shareholders, more likely through buybacks.” I think UBER stock looks terrific.
Financials ETF (XLF) March 33 Put – The XLF was down marginally last week as leading financials (C, WFC) continue to look “bleh” at best.
Energy ETF (XLE) January 85 Calls – The XLE gained another 2.5% last week as oil steadily moves higher. Our position is now at a potential profit of 70%.
