January 24, 2025
SoFi (SOFI) Earnings
Monday morning before the market open, SoFi (SOFI) will report earnings. Heading into the event we are holding 2/3rds of a position, having taken partial profits earlier this week.
I am going to hold my position through earnings, as option activity has been wildly bullish. In addition, with profits in the bank on a piece of this trade, we can take some risk.
That being said, I would expect the reaction to earnings on Monday are going to be wild. This is a highly controversial stock, and if the company doesn’t deliver, the stock could get nailed … though, conversely, if the company beats earnings the stock could fly.
Because of the downside risk, if you want to lower your exposure or exit the balance of the trade you must Sell to Close before the end of the trading day today (for an approximate profit of 40%).
SOFI - With the stock trading at 18.25, the options market is pricing in a move of $2.50 next week, or 15.75 to the downside and 20.75 to the upside.
Open interest is skewed bullish on a ratio of 1.8:1 call vs. put.
Skew is pricing in extreme downside fear and upside interest.
January 22, 2025
SOFI and GLW Position Updates
In the last two days, we have taken partial profits in SOFI (25%) and GLW (70%) as both stocks broke out to the upside. Much like MRVL from Friday when we took partial profits, selling a piece of SOFI and GLW was not easy. This is what I mean …
Option activity in both GLW and SOFI has been strong as of late, and today that action has ramped up, including these trades:
Today - Buyer of 1,000 Corning (GLW) August 60 Calls for $2.40 – Stock at 53.5
Today - Buyer of 5,000 Corning (GLW) September 75 Calls for $0.57 – Stock at 54
Today - Buyer of 5,000 Sofi (SOFI) January 17.5/20 Bull Call Spreads (exp. 1/31) for $0.80 – Stock at 17.5
GLW looks great as the stock is busting out to a new multi-year high today, likely on AI-related infrastructure optimism. Though because the company will report earnings next week (1/29), I felt that sticking to the profit-taking system was the right move.
Similarly, SOFI has earnings next week (1/27) and this stock is nuts, so taking partial profits into this announcement felt like the right risk management decision. Though the bull call spread buy noted above does give me some confidence heading into earnings.
Essentially, with market and individual stock volatility ramping up as of late, we are going to continue to “stick and move” with our positions. And as always, we hope these initial sales are giant mistakes and MRVL/GLW/SOFI stocks and our calls continue to ramp higher.
January 21, 2025
Weekly Update
The market rose nicely last week as the bond market worries eased. By week’s end the S&P 500 and Nasdaq had rallied 2.9%, and the Dow had gained 3.8%.
Stocks on Watch
With January expiration behind us, and having exited our HOOD, ONON, PLTR and WMT positions, the Cabot Options Trader/Cabot Options Trader Pro portfolios are in a totally different spot than they have been in for months. Essentially, we have been riding big winners for the past six months, and managing those trades while sprinkling in new positions that have been fine, but not nearly as successful as those big 2024 winners above.
So, what am I thinking next in terms of new buys?
First off, I’m not sure we are totally out of the woods when it comes to the bond market worries that shook the market in recent weeks. I’m bullish long term, and would love for the market to rip higher from here, but am also open to continued volatility, especially with the new administration taking office this week.
Second, when evaluating the current portfolio, I am fairly happy with the makeup of our stocks as we have positions in stocks from a variety of sectors. This is the most diverse the portfolio has been in years.
Finally, my tentative plan is to somewhat sit on the sidelines this week (maybe) as earnings season will really ramp up next week, and our best trades over the past 10 years have been buying earnings stars that emerge following reporting quarterly results.
That being said, if option activity is too overwhelming to pass up this week in any stock, we certainly have the room to add to the portfolio.
Volatility
The Chicago Board of Options Exchange Volatility Index (VIX) closed the week at 16, which is a pullback from the “danger zone” of 20, but isn’t truly at the “no fear” 12-14 range.
Essentially, a 15/16 VIX is right where I want it as there is not extreme complacency which can be concerning, and also not extreme fear, which can also be worrisome.
Option Order Flow was fairly mixed this past week as my Options Barometer came in at:
Monday – 5
Tuesday – 5
Wednesday – 5
Thursday - 5
Friday – 6
Events for the Week to Come
Traders this week will be focused on any big policy announcements from the Trump administration. As was the case during President Trump’s first term, love him or hate him, there was certainly market volatility during his four years in office.
On the earnings front this week there are many “old school” companies reporting throughout the week (MMM, UAL, JNJ, VZ, AXP, etc.) as well as NFLX today after the close. Essentially, this is the calm before the storm, as earnings season ramps up in a big way next week.
What Traders are Saying
Last week we bought our first position in almost a month, having waited out weeks and weeks of choppy/bearish action. Was I so sure that the recent weak market action was over, and that MRVL was a sure thing to rise? No. But I thought the odds were improving. This is what I mean.
First off, the selling in the market had become fairly intense as the bond marker worries were intensifying. Yet despite the market making a recent low on Monday, the VIX was rising but was hardly exploding higher. This lack of extreme fear in the VIX gave me some confidence that the sell-off was not going to become too much worse. And with that in mind, I started hunting for the stocks that had held up the best during the sell-off.
That led me to MRVL, which had given up some ground of late but looked WAY better than its semiconductor peers which were under heavy pressure. Plus, option activity had been very bullish in MRVL for weeks, not looking for a short-term bounce, but instead playing a longer-term stock rally.
Fortunately, the bond market shakeout slowed down on Tuesday, and on Wednesday the market rallied hard as inflation worries faded, and by week’s end we had sold the first piece of our MRVL trade for a quick 20% profit.
So where do we go from here with MRVL?
First off, as we were selling a piece of our position a trader bought 6,000 Marvell (MRVL) January 125 Calls (exp. 1/31) for $2.65 – Stock at 121.5. This call buy gave me pause as to whether we should stick to the system and take partial profits … but I decided to obey the rules of the system and make an initial sale.
As I always say, let’s hope this first sale is a monster mistake and the stock goes way higher from here. And based on the stock strength and option activity I think MRVL could be a big winner if the market stays in gear.
Open Positions
Corning (GLW) May 47 Calls – GLW had a great week as the stock rallied 7% and is once again approaching the 50 level ahead of earnings on January 29. Our trade is in good shape.
Marvell (MRVL) June 115 Calls – See “What Traders are Saying” above.
Occidental Petroleum (OXY) March 52.5 Calls – After a strong run the past three weeks OXY stock mostly chopped around last week. Though of note, option activity was very strong throughout the week including these trades:
Monday - Buyer of 3,000 Occidental Petroleum (OXY) February 60 Calls for $0.40 – Stock at 53
Monday - Buyer of 3,000 Occidental Petroleum (OXY) February 57 Calls (exp. 2/7) for $0.47 – Stock at 53.
Rocket (RKT) March 20 Calls – As interest rate worries have mellowed a bit of late, bullish option activity has picked up in RKT. That being said, it would take a miracle for RKT to get back above 20 (but we can hope).
Financials ETF (XLF) June 50 Calls – Strong earnings from leading financials JPM/WFC/C catapulted the XLF back above 50 for the first time in weeks. Very quickly the XLF looks great again.
Jets ETF (JETS) January 26 Calls (exp. 2026) – The JETS ETF continues to look great in soft and strong markets, which is a very positive sign. Earnings this week from UAL and AAL will be the two big catalysts for the sector.
Sofi (SOFI) July 16 Calls – SOFI rallied 20% last week and bullish option activity has really ramped up (see below). Also, the stock started with an Outperform rating from Wall Street firm Blair on Wednesday.
Monday - Buyer of 2,300 Sofi (SOFI) March 16 Calls for $0.96 – Stock at 13.75
Friday - Buyer of 5,000 Sofi (SOFI) January 27 Calls (exp. 2026) for $2.05 – Stock at 16.6.
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