November 15, 2024
November Expiration
Today is the expiration of two our positions. Let’s dive in …
LYFT is trading well above our November 12.5 strike price, which means come Monday we will be left without a stock or option position in LYFT. You do not need to address this position today.
Next up is MSOS which unfortunately got hit hard following the election, which means the November 8 call that we sold for $0.43 will expire worthless today. Much like LYFT above, you will not need to address this MSOS position today, as the call we sold will simply expire worthless.
November 11, 2024
Weekly Update
The election results and Federal Reserve rate cut were seemingly just what the market was looking for as the S&P 500 rallied 4.7% last week, the Dow added 4.65% and the Nasdaq gained 5.4%.
Stocks on Watch
Stocks went absolutely bananas last week following the election, which is great for our portfolio (mostly). Now the question becomes do we chase the earnings winners, many of which were up 30-40%, or do we focus new buys on stocks/sectors that could be beneficiaries of the Trump administration?
My lean is to keep it simple and focus on stocks/sectors that could work in the Trump presidency. My two leading candidates based on that thought process are a play on the Financials (XLF), which rallied 5.5% last week, or the Russell 2000 (IWM), which gained a whopping 9%.
And for now, my preference of those two might be the financials as my options scanner saw big call buying following the election including these call buys:
Buyer of 5,000 Blackstone (BX) March 180 Calls for $12 – Stock at 174
Buyer of 3,000 Apollo (APO) January 185 Calls for $16.30 – Stock at 162
Buyer of 7,000 JPMorgan (JPM) March 280 Calls for $4 – Stock at 248.
Finally, if the market is going to go truly crazy and growth stocks are going to soar, this call buy Friday was an interesting play on it (though as always I wouldn’t buy calls this far out-of-the-money):
Friday - Buyer of 80,000 ARK ETF (ARKK) December 60 Calls for $0.60 – Stock at 53.3.
Volatility
The Chicago Board of Options Exchange Volatility Index (VIX) closed the week at 15, which was a dramatic, though expected, decline following the election and the Federal Reserve announcement. If I were to guess, and this is subject to change if something “big” happens, I expect the VIX will trade somewhere between 12-18 for the remainder of the year, with 15 being its average/middle ground.
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 – 5
Events for the Week to Come
Now that the blockbuster week has passed (and that was exhausting between the election/Fed/earnings season), traders will settle in for a “normal” week of market-moving events, including inflation data via the Consumer Price Index (CPI) on Wednesday and Producer Price Index (PPI) on Thursday.
On the earnings front, it will be another busy week, though we are at the point of earnings season where we somewhat transition away from mega-caps and into slightly smaller/younger companies.
What Traders are Saying
Okay, finally the election is over (oh, and the Fed cut interest rates last week also), so what might the rest of the year look like?
Here is a look at previous cycles following the election, and then the historical returns from November on …
Bloomberg: Following the election, the S&P 500 typically rallies through inauguration day before moderating.
@RyanDetrick: We are entering the best six-month stretch of the year historically for stocks:
And while it seems like the market is on course for big returns in the months to come, I do want to point out via Goldman Sachs, sentiment is running very hot (often a counter-indicator):
Open Positions
Robinhood (HOOD) January 15/26 Bull Call Spread – HOOD rallied a whopping 29% last week (YEESH!). This is a positive development for our big winning position that has certainly had its ups and downs.
Of note, HOOD has for now at least broke above our short strike price. This is great, though admittedly my sale of the 26 call during one of the many down swings may prove to be a mistake if HOOD stock keeps soaring higher as I will have limited our profit potential.
Corning (GLW) May 47 Calls – GLW gained 1% last week, which was somewhat disappointing given the market’s big move higher. That being said, I think GLW stock looks great and our calls are in good shape.
Hewlett Packard (HPE) January 22 Calls – HPE rallied 9.5% last week, closing above 22 for the first time in months. And with that stock rally our calls are showing some real signs of life again.
Lyft (LYFT) November 12.5 Covered Call – LYFT soared higher on earnings, and it appears we will be taken out of our covered call position this Friday. I will update you on this later this week as we get closer to expiration.
Marijuana ETF (MSOS) November 8 Covered Call – The MSOS got drilled following the election as three states voted against legalization. Because of this sell-off the November 8 call that we sold for $0.43 will almost surely expire worthless this Friday.
On Holding (ONON) January 42.5 Calls – ONON will report earnings tomorrow before the market open. Expect a look at what the options market is pricing in for this event later today.
Oracle (ORCL) March 160 Calls – Goodness gracious that was a big week for ORCL as the stock rallied 11%. And because of that rally, our calls are now at a potential profit of approximately 135%.
Palantir (PLTR) January 26/45 Bull Call Spread – PLTR went crazy to the upside last week which is great for our position which is at a monster profit. And on Friday a trader bought these calls, looking for way more gains in the months to come:
Friday - Buyer of 4,000 Palantir (PLTR) January 70 Calls for $1.40 – Stock at 58.
Of note, much like HOOD above, my sale of the PLTR January 45 call may prove to be a big mistake as I limited our upside potential … though goodness gracious, who could have seen this kind of a rally coming?!!
Nasdaq ETF (QQQ) November 430 Puts – This Friday the last piece of our hedge will almost surely expire worthless. This is a fine scenario with monster winners like HOOD/ORCL/PLTR/WMT and more working so well.
Occidental Petroleum (OXY) March 52.5 Calls – OXY will report earnings Tuesday after the market close. Expect an earnings preview that morning/early afternoon.
Rocket (RKT) March 20 Calls – RKT mostly chopped around last week as interest rates continue to be a weight around the stock’s neck.
Of note, RKT will report earnings Tuesday after the market close. Expect an earnings preview that morning/early afternoon.
Unity Software (U) December 18 Calls – Late last week we locked in a profit of 42% on the second piece of our U calls ahead of earnings. In the short term at least, that sale was the right move as U fell 7% on earnings.
If U can’t get going VERY soon, we will likely exit this position as December expiration is coming fast.
Walmart (WMT) January 65/95 Bull Call Spread – WMT gained another 3% last week and our position is now at a potential profit of approximately 365% ahead of earnings next Tuesday (11/19).
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