August 2, 2024
Stock on Watch – Intel (INTC)
The market is getting smashed again today as the potential for a recession for the economy is starting to slowly seep into traders’ minds. Who knows if that will in fact happen, but for now fear is up (VIX traded at 29 this morning) and stocks are down hard.
One of those stocks that is down is Intel (INTC), which is a total train wreck after announcing disappointing earnings, layoffs, and a suspension of the dividend. YIKES! In response to this trifecta of bad news, INTC stock is down 25% on the day and at a multi-year low.
And while I am NOT going to buy INTC, I know that there are plenty of Cabot Options Traders who like to “buy the dip” when things get nasty for a stock.
IF you were looking to get involved with INTC, this trade this morning is compelling if you wanted to throw a couple calls in your back pocket for a year:
Buyer of 14,000 Intel (INTC) June 20 Calls (exp. 2025) for $4.43 – Stock at 21
Stepping back to the market, we have been selling positions for the past several weeks, and should conditions continue to worsen, we will keep selling. But for now, and I mean this second in a wild market, let’s stand pat with our portfolio.
July 29, 2024
Weekly Update
Going into last week we knew it had the potential to be a wild five-day stretch, and the market didn’t disappoint as the indexes swung violently, and sector rotation was intense. By week’s end the S&P 500 had fallen 1.55%, the Dow had rallied 0.5%, and the Nasdaq had lost 3.8%.
Stocks on Watch
Last week in this “Stocks on Watch” section I preached patience as I felt the odds favored a very tricky week of trading (which turned out to be the case). That might be the situation again this week as there are several potential major market-moving events (see more below in “Events for the Week to Come”).
And while I am trying to be patient with new plays, I am still building a watch list of earnings season winners. One of those earnings season winners is General Aerospace (GE) which initially soared on quarterly results, then got hit when the market got mauled on Wednesday, and then bounced back near the post-earnings highs on Friday.
And into this volatility, a trader/traders accumulated these call positions (and more) targeting a much bigger move higher in the months to come…
Wednesday - Buyer of 2,000 GE October 180 Calls for $5.15 – Stock at 168
Tuesday - Buyer of 5,000 GE September 180 Calls for $5.90 – Stock at 173.
GE stock responded well to earnings last week, joining other “industrial peers” such as MMM, RTX, LMT, and NSC, all of which soared on earnings in an interesting week of sector gyrations.
Volatility
The Chicago Board of Options Exchange Volatility Index (VIX) closed the week at 16.5, having traded as high as 19.5 on Thursday when the market was at its lows and when there was seemingly not a bid for the Nasdaq which was quickly falling apart.
Fortunately for the bulls, the selling pressure eased on Friday, and led by the Russell 2000 (IWM) the market held its ground into the weekend, which weighed on the VIX.
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 – 5
Events for the Week to Come
If you thought last week was volatile, this week certainly could match it, as traders will be anxiously awaiting the Fed Announcement on Wednesday (no interest rate cut expected, but it is possible), followed by the July Jobs Report on Friday, and the biggest week of S&P 500 earnings this quarter led by Microsoft (MSFT) and Meta (META) on Wednesday and then Apple (AAPL) and Amazon (AMZN) on Thursday. Buckle up!
What Traders are Saying
Well, I think this synopsis of last week and this upcoming week perfectly sums it up, via Bank of America Trading Desk:
“Just… wow … Last week …
“Kamala Harris took the stage.
“CRWD chaos persisted.
“GOOG sparked big AI questions, NOW answered them.
“Luxury stocks cratered.
“V missed on EVERY metric.
“Multiple Consumer Stocks whiffed, but went higher?
“UPS cut the outlook.
“F plummeted -18%.
“Q2 GDP surprised to the upside.
“VIX dropped -10%, then popped +25%.
“50-day Moving Averages across major indexes were broken, then reclaimed, then broken again. And …
“This week is actually the busiest week of Earnings, and …
“Fed Meeting, and …
“Jobs Report …
“YIKES!”
I couldn’t have said it any better … it was a week! And this week will almost surely be crazy as well.
Open Positions
Cameco (CCJ) December 55 Calls – CCJ is definitely on the potential chopping block as the stock broke down last week. A sharp rally could save our position, but headed into earnings on Wednesday I’m not loving the recent price action.
Robinhood (HOOD) January 15/37 Bull Call Spread – HOOD came under pressure last week ahead of earnings on August 7. Our position is in good shape headed into earnings, at a potential profit of approximately 175%.
Hewlett Packard (HPE) January 22 Calls – HPE has been bleeding lower as of late, which is not ideal. That being said, the stock looks way better than most of its peers, and on Monday a trader bought 1,000 Hewlett Packard (HPE) January 21 Calls for $2.05 – Stock at 20.5.
Lyft (LYFT) August 16 Covered Call – LYFT and peer UBER have been slowly pulling back for weeks. Headed into earnings on August 7, we may sell another call to lower our cost basis in the days to come.
Marijuana ETF (MSOS) September 9 Covered Call – The MSOS was mostly unchanged last week which is totally fine for our short volatility trade which we will continue to let decay away (good).
Novo Nordisk (NVO) September 135 Calls – NVO and peer LLY had bad weeks and all of a sudden my excitement about NVO breaking out has somewhat faded. Earnings on August 7 will be the next big event for our position.
On Holding (ONON) January 42.5 Calls – ONON had another pretty good week as the stock, which had looked terrible for weeks, has seemingly come alive despite its peers coming under pressure of late.
Palantir (PLTR) January 26 Calls – After weeks of holding up amidst pressure on its AI peers, PLTR finally gave up some ground last week. That being said, the stock looks WAY better than its cohort, and on Friday a trader bought these calls looking for the stock to rebound:
Friday - Buyer of 3,000 Palantir (PLTR) August 28 Calls (exp. 8/2) for $0.42 – Stock at 27.
Nasdaq ETF (QQQ) November 430 Puts – For better or worse our QQQ puts had another decent week as growth stocks continue to be under pressure. For that reason we will continue to hold our hedge.
Unity Software (U) December 18 Calls – Despite the Nasdaq getting hit, U was mostly unchanged last week, and continued to attract big call buying activity. The company will report earnings on August 8.
Walmart (WMT) January 65 Calls – WMT lost a touch of ground last week, though it remains within striking distance of its all-time high ahead of earnings on August 15. Our position remains in great shape.
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