December 9, 2024
Stocks on Watch – EQT (EQT)
One of my favorite set-ups when it comes to option activity is repeated call buying day after day. And we have seen that the last week in natural gas play EQT (EQT), including these trades:
Today – Buyer of 2,400 March 50 Calls for $2.53 – Stock at 46.3
Yesterday – Buyer of 10,000 March 50 Calls for $1.60 – Stock at 44
Yesterday – Buyer of 6,000 June 50 Calls for $2.40 – Stock at 43.5
Tuesday – Buyer of 6,000 March 50 Calls for $1.39 – Stock at 43.5
Monday – Buyer of 5,000 March 50 Calls for $1.20 – Stock at 43.5
With today’s buy of the March 50 calls, the total accumulated calls purchased on that expiration/strike will be approximately 25,000 this week. Very interesting action to say the least.
I will continue to watch this stock closely, and if there is another large buy or two, we could be jumping into a position soon.
December 9, 2024
Weekly Update
It was another interesting week for the market as the Nasdaq rallied 3.3%, while the S&P 500 added 1% and the Dow fell 0.6%. That is quite the performance difference between the Nasdaq and Dow!
Stocks on Watch
I’ve been really wrestling with how I want to continue to add to the portfolio if the market remains in gear. Here are my thoughts.
In the “growth” space, which has been the best place to be in the market of late, we are currently holding positions in:
HOOD
ONON
HPE
PLTR
ORCL
GLW
This feels like a lot of exposure, so I’m somewhat hesitant to add more. Though admittedly we are holding partial positions in all of those stocks, so I suppose we have room to buy even more.
And if we were to add more growth, I’m intrigued by these earnings season winners:
TSM
CRDO
MRVL
In the more cyclical side of things, we own:
WMT
RKT
XLF
JETS
OXY
And if we were to add to this group here are some good-looking stocks that fit that general category:
BROS
DECK
CMG
What makes this decision somewhat challenging is the market narrative seems to flip-flop every day as growth goes out of favor and cyclicals race higher, and then the next day it switches in the other direction. Throw in the end-of-the-year rebalancing, and this is a somewhat tough “guessing game.”
My plan, as always, is to keep it simple and simply let option activity pull us into the best trade idea.
Volatility
The Chicago Board of Options Exchange Volatility Index (VIX) closed the week at 12.75, its lowest close since July. Of note, I wouldn’t expect the VIX to rise much until right before the Fed meeting next week, as seasonally this is a quiet month for market volatility.
Option Order Flow was fairly mixed this past week as my Options Barometer came in at:
Monday – 5
Tuesday – 5
Wednesday – 6
Thursday - 5
Friday – 7
Events for the Week to Come
With inflation showing signs of being stickier than anticipated ahead of the December Federal Reserve announcement, traders will be laser focused on the Consumer Price Index (CPI) on Wednesday and Producer Price Index (PPI) on Thursday.
On the earnings front it will be a generally quiet week, though investors will be watching Oracle (ORCL) Monday, Adobe (ADBE) on Wednesday and Broadcom (AVGO) on Thursday.
What Traders are Saying
On Thursday of last week we added the JETS January 26 calls to the portfolio. Here is why I thought this was such an attractive call buying opportunity, as well as the risks.
First off, the sector has been firing on all cylinders of late as the leading stocks have been racing higher. And it’s very possible that while this isn’t the first inning of the JETS rally, it certainly could be the third or fourth, and this group could be on the verge of a longer-term breakout.
Second, option activity has been RED hot in the group of late. Literally every day there is call buying in AAL, DAL, UAL, JETS and so on. Here are a couple of those buys:
Buyer of 8,500 Delta Airlines (DAL) January 75 Calls for $1.20 – Stock at 67
Buyer of 13,000 Jets ETF (JETS) March 27 Calls for $0.73 – Stock at 25.7 (rolled from January calls)
Buyer of 1,500 United Airlines (UAL) February 100 Calls for $11 – Stock at 102.
And finally, what was so attractive to me about this set-up in the JETS calls was to pay $2.49 for a years’ worth of exposure felt like a price that was WAY too cheap to pass up.
Now, could the JETS trade fail as we bought the top? Sure, there is always that risk.
That being said, if the group is still in the early innings of this move higher it would not be hard for our calls to go from $2.49 to $5, to $10, to …
Open Positions
Robinhood (HOOD) January 15/26 Bull Call Spread – HOOD gained another 10% last week and closed Friday at a new high. At this point we only have $0.20 left to capture in our bull call spread.
Also of note, late last week Goldman Sachs upgraded HOOD to Buy noting the company’s growth driven by continued wallet share gains among highly profitable active traders, and a long-term opportunity to expand its total addressable market into new areas, such as wealth and internationally.
Corning (GLW) May 47 Calls – Slowly but surely GLW is inching back towards the 50 level which is a positive development for our calls that are now at an approximate profit of 28%.
Hewlett Packard (HPE) January 22 Calls – HPE stock reacted well to earnings on Friday as the stock rallied 10.5%, closing at a new recent high. And into that stock strength option activity was very bullish including this trade:
Friday - Buyer of 7,000 Hewlett Packard (HPE) January 25 Calls for $0.60 – Stock at 24.
Marijuana ETF (MSOS) – My patience with this position is running very thin as the MSOS continues to be dreadful … and that may continue through the close of 2024 as traders tax-loss harvest the worst performers.
On Holding (ONON) January 42.5 Calls – ONON fell marginally last week though it continues to look great. Not much more to add, other than time is going to start to be an issue with this January position.
Oracle (ORCL) March 160/240 Bull Call Spread - ORCL gained 3.5% last week closing right near its all-time high ahead of earnings today after the close. And into that strength we sold the March 240 call for $3.10, which lowered our cost on this bull call spread to $11.83.
Expect a full earnings preview later today.
Palantir (PLTR) January 26/45 Bull Call Spread – Goodness gracious, PLTR made yet another new high last week as the stock is a total freight train. At this point there is only $0.20 left to capture in our bull call spread.
Occidental Petroleum (OXY) March 52.5 Calls - OXY and almost all oil stocks look dreadful, and I may soon take a loss on this trade as there has been virtually zero sustained strength. Though I do wonder if these stocks will come alive when the calendar flips to 2025.
Rocket (RKT) March 20 Calls – RKT is another one that looks awful … though maybe/possibly that will change when the calendar flips to 2025 (but that might be a stretch)
Walmart (WMT) January 65/95 Bull Call Spread – Another week, another new high for WMT as our position is now at a potential profit of 600%. And of note, option activity remains very bullish in the stock including this call buy from Thursday:
Buyer of 2,000 Walmart (WMT) August 110 Calls for $3.05 – Stock at 94.25.
Financials ETF (XLF) June 50 Calls – The XLF had a down week as money raced into growth stocks, which was somewhat a reversal of the previous week. Such is the daily/weekly rotation of the market. Regardless, I think the XLF and its holdings look great.
Jets ETF (JETS) January 26 Calls – On Thursday of last week we added the JETS January 26 calls to the portfolio. See “What Traders are Saying” above to read more about this new buy.
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