Buy Call U

November 12, 2024
Sell U and Earnings Preview OXY/RKT: Sell the Balance of your Unity (U) December 18 Calls for $2.10 or more.

Unity (U) has pulled back on earnings, and with just a month to go until expiration, it is time to walk away from the last piece of our position so we can prepare to move this capital into fresher ideas.

To execute this trade you need to:

Sell to Close your U December 18 Calls

We took profits twice on this trade, but unfortunately, we will take a loss on the balance. Big picture, this U trade was a shot worth taking but not a big win/loss for the portfolio, and that is fine.

Moving on …

Today after the close we have two more earnings. Let’s dive in …

OXY will report earnings after the close today and headed into the event the stock has been mostly chopping around for the past month as the situation in the Middle East has somewhat cooled off, which has weighed on the price of oil.

I am going to hold my position through earnings as we have plenty of time until March expiration, and having a stock like OXY in the portfolio diversifies us a touch from our mostly tech portfolio.

Of note, I wouldn’t expect (though there’s no guarantee) OXY will move too much on earnings as commodity stocks typically move in-line with the price of the commodity they are associated with.

OXY - With the stock trading at 50.7, the options market is pricing in a move of $2 this week, or 48.7 to the downside and 52.7 to the upside.
Open interest is skewed bullish on a ratio of 1.4:1 call vs. put.
Skew is pricing in typical downside fear and upside interest.

Next up is RKT, which will also report this afternoon.

This is the one position in our portfolio that has flat out not worked as the interest rate landscape changed dramatically after we bought our position, and has continued to worsen. Grrrr!

At this point, with our calls “only” worth $1, I am going to hold my position to see if we can get a rebound or even a short squeeze. However, if that does not happen on earnings, we may cut this trade in half soon.

RKT - With the stock trading at 15.5, the options market is pricing in a move of $2 this week, or 13.5 to the downside and 17.5 to the upside.
Open interest is skewed bullish on a ratio of 4.2:1 call vs. put.
Skew is pricing in extreme downside risk and upside interest.

November 7, 2024
Sell a Third of Existing Position/U Earnings Preview: Sell a Third of your Unity (U) December 18 Calls for $4.50 or more.

Unity Software (U) will report earnings today after the close. Heading into the event, we are holding two-thirds of a position having taken partial profits once. Here are my thoughts on this situation …

I think U stock looks good, and the market is definitely in gear.

However, our position is an in-the-money December call which means should U stock fall hard tonight on earnings, our call will get obliterated. Because of that, let’s play this situation a bit defensively by selling another piece of our trade.

Hopefully, this sale will be a mistake, U stock will react well to earnings, and the final piece of our trade will explode higher in value.

To execute this trade you need to:
Sell to Close a Third of your U December 18 Calls

U - With the stock trading at 22, the options market is pricing in a move of $3 this week, or 19 to the downside and 25 to the upside.
Open interest is skewed bullish on a ratio of 2.1:1 call vs. put.
Skew is pricing in extreme downside risk and upside interest.

July 18, 2024
Buy the Unity Software (U) December 18 Calls (exp. 12/20/2024) for $4 or less.

As I highlighted yesterday, Unity Software (U) was several days into wild call buying activity. And that action is continuing yet again today. Here are some of those bullish trades:

Today - Buyer of 8,000 Unity Software (U) August 21 Calls for $1.13 – Stock at 18

Today - Buyer of 2,000 Unity Software (U) August 19 Calls for $1.45 – Stock at 17.8

Tuesday - Buyer of 4,000 Unity Software (U) September 20 Calls for $1.40 – Stock at 17.4

Monday - Buyer of 7,000 Unity Software (U) August 20 Calls for $0.80 – Stock at 17

July 11 - Buyer of 3,000 Unity Software (U) August 17 Calls for $1.65 – Stock at 16.7.

And while I think the stock looks “meh” (at best), this call buying is just too strong, and perhaps suspect, for me to pass up. Because of that, I am going to add the stock to the portfolio today.

To execute this trade you need to:

Buy to Open the U December 18 Calls

The most you can lose on this trade is the premium paid, or $400 per call purchased.

The risks I see in this trade are pretty straightforward …

The Nasdaq is trading lower by 2.6% today, and it’s possible we could be in the early innings of a pullback which would likely hurt U.

U stock has not participated in the market’s advance, which is not the best sign, and I typically try to avoid “dumpster diving.”

That being said, this call buying is overwhelmingly bullish, and paying $4 for a call with over five months until expiration is a risk/reward that I like. For those reasons, I am going to add U to the portfolio today.