November 1, 2024
Scheduling Note and SMR Update
Before I dive into our SMR Covered Call, I wanted to note that the usual Monday morning Week in Review is going to be totally different than the usual email and will come slightly later Monday morning. This is what I mean …
Essentially, with the election Tuesday, little of what I say in terms of the market or our positions on Monday morning is truly going to matter just 24/48 hours later. And because of that, this Monday update will be focused on the election and what the market is pricing in terms of risk, as well as some hedging ideas and ways to play a move higher as well. Expect this email sometime around 11 Eastern on Monday.
Moving on …
Today is the expiration of our SMR November 17 covered call. The good news is this trade worked perfectly, and with just hours before the expiration of our trade, SMR is trading $3 above our short strike.
Should SMR close above 17 today (very likely) the call we sold will expire in the money and, come Monday, we will be left without a stock or option position in SMR, and we will have made $60 per covered call, or a yield of 3.65% in just over one week’s time.
October 30, 2024
Robinhood (HOOD) Earnings and Corning (GLW) Update
Today after the close, Robinhood (HOOD) will report earnings. Headed into the event our position is at a monster profit (approximately 380%) as the stock is trading near its multi-year highs.
I am going to hold my position through earnings, as I think the stock looks terrific and option activity has been strong.
That being said, it is possible that the stock may be due to pull back given the strong rally as of late, and because of that risk, if you want to ring the register on another piece of your position, you must Sell to Close before the end of the trading day today.
HOOD - With the stock trading at 27.5, the options market is pricing in a move of $3 this week, or 24.5 to the downside and 30.5 to the upside.
Open interest is skewed bullish on a ratio of 2:1 call vs. put.
Skew is pricing in typical downside fear and upside interest.
Finally, I wanted to briefly talk about GLW, the first piece of which we sold for a profit of 53.5% yesterday following earnings.
My plan for this trade, much like all winners, is to continue to monitor option activity in the days after earnings to help guide how I will manage this trade. And while the stock looks great, I do want to note yesterday at least, into the big stock rally, option activity was mostly mixed … though in fairness, GLW rarely trades lots of options, outside of the surge of call buying that brought us into our trade three weeks ago.
October 28, 2024
Corning (GLW) Earnings
Corning (GLW) will report earnings tomorrow before the market open. Heading into the announcement, the stock is trading just short of its recent highs, though it is trading higher today by 1.5% following news that the company inked a new multi-year deal with AT&T.
I am going to hold my position through earnings as the stock looks great and option activity has been very strong. Also, I continue to think the price of our calls is right … though of note, should the stock fall tomorrow following earnings, the price of these calls will get hit hard.
GLW - With the stock trading at 47, the options market is pricing in a move of $3 this week, or 44 to the downside and 50 to the upside.
Open interest is skewed bullish on a ratio of 3:1 call vs. put.
Skew is pricing in typical downside fear and upside interest.
October 28, 2024
Weekly Update
Ahead of a monster week of economic data and earnings releases the S&P 500 fell 0.85%, the Dow lost 2.6%, and the Nasdaq gained 0.4%
Stocks on Watch
Let’s start here … my list of earnings season winners continues to grow, and all of these stocks below are on my watchlist for new buys should the market react well to earnings season this week, and then the election:
MS
TSM
BXGM
PM
And while I’m intrigued by those earnings winners, and more, I do want to note about those stocks above, none have really ramped higher in the days after their initial earnings move, which isn’t terribly surprising given the choppy market action.
Next up on my watchlist is Starbucks (SBUX) as the company reported a disaster quarter last week, and yet despite the bad news, the stock initially sold off, but then came all the way back to unchanged. When a stock reacts OK/good to bad earnings, it leads me to believe that traders are betting the worst is behind the company.
And in fact, option activity was bullish following the earnings report, including this longer-term call buy:
Friday - Buyer of 1,000 Starbucks (SBUX) December 95 Calls (exp. 2026) for $19.50 – Stock at 97.
Speaking of earnings reaction and option activity, Tesla (TSLA) stock soared higher following earnings last week, and more importantly to me, option activity went wildly bullish following the earnings move, including these BIG premium call buys:
Thursday - Buyer of 50,000 Tesla (TSLA) February 240 Calls for $36.85 – Stock at 250 ($185 million call buy)
Friday - Buyer of 10,000 Tesla (TSLA) February 240 Calls for $48.40 – Stock at 266 ($48 million call buy).
I’ve never gotten a firm grasp on what makes TSLA stock move day to day, but goodness gracious this call buying is powerful and intriguing.
Volatility
The Chicago Board of Options Exchange Volatility Index (VIX) closed the week at 20. Of note, with the election just a week away, I anticipate the VIX will not be a great indicator of market movement as it will likely remain elevated into the big event no matter if the market is up or down this week.
However, once the election has been called for one candidate or another, I expect the VIX will get hit very hard … assuming the election process goes “smoothly.”
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
On the macroeconomic front, it will be a somewhat full week as traders will be watching GDP on Wednesday, PCE (inflation data) on Thursday and the Jobs Report on Friday.
And in terms of earnings, it’s going to be a monster of a week led by AAPL, AMZN, GOOG, MSFT, META, XOM, CAT, UBER and MORE.
What Traders are Saying
To be frank, I don’t have a lot to say in terms of the market, as traders (myself included) continue to bide their time until the election next week. For that reason, I figured I would note the expected earnings moves for some of the most anticipated earnings announcements this week:
AAPL - $8 expected move, or 3.5%
AMD - $11 expected move, or 7%
MSFT - $26 expected move, or 6%
META - $47 expected move, or 8.2%
UBER - $6 expected move, or 7.8%
AMZN - $13 expected move, or 7%.
Open Positions
Robinhood (HOOD) January 15/26 Bull Call Spread – HOOD made a new high last week, ahead of earnings on Wednesday. Our position is now at a potential profit of approximately 340% headed into the big event.
Corning (GLW) May 47 Calls – Much like the market, GLW mostly chopped around last week ahead of the company’s earnings report on Tuesday before the market open.
Hewlett Packard (HPE) January 22 Calls – HPE gave up some of its recent gains last week, which is not what we are looking for. My patience with this position is running out very fast.
Lyft (LYFT) November 13 Covered Call (exp. 11/1) – LYFT continues to chop around aimlessly, which is exactly what we are looking for ahead of the expiration of our 11/1 call this Friday.
Of note, late last week a trader bought 10,000 Lyft (LYFT) June 20 Calls for $1.16 – Stock at 13.75.
Marijuana ETF (MSOS) November 8 Covered Call – The MSOS made a new recent high last week ahead of the election next week. Our covered call is working well as we await the next big catalyst for the sector.
On Holding (ONON) January 42.5 Calls – ONON looked somewhat suspect last week, until peer Deckers (DECK) reported a blowout earnings report which catapulted ONON back above the 50 level.
Oracle (ORCL) March 160 Calls – ORCL mostly chopped around like the market last week. Not much more to add other than our trade is at a potential profit of approximately 140%.
Palantir (PLTR) January 26/45 Bull Call Spread - PLTR made a new high on Friday and looks terrific despite the market’s wiggles. Our position is now at a profit of approximately 315%.
Nasdaq ETF (QQQ) November 430 Puts – The election next week is the last remaining catalyst for our lone hedge, that we hope will expire worthless.
Occidental Petroleum (OXY) March 52.5 Calls – OXY will likely come under pressure this morning as oil is down 6% pre-market following a less-than-expected response from Israel … but who knows how this situation will play out longer term.
Of note, last week a trader/traders bought these positions:
Tuesday - Buyer of 3,500 Occidental Petroleum (OXY) December 60 Calls for $0.50 – Stock at 52.3
Friday - Buyer of 1,000 Occidental Petroleum (OXY) December 55 Calls for $1.35 – Stock at 51.7.
Rocket (RKT) March 20 Calls – RKT continues to be a choppy mess ahead of earnings which I would expect will be released soon, though interestingly I don’t yet see a date announced for the quarterly results. Of note, on Friday a trader bought 4,000 Rocket (RKT) November 16 Calls for $1.40 – Stock at 16.35.
Unity Software (U) December 18 Calls – U gave up some ground last week, which is not what we are looking for ahead of earnings on November 7 (election week, yuck).
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 approximately 315%.
NuScale Power (SMR) November 17 Covered Call (exp. 11/1) - SMR is our newest short-term play that will expire this Friday. This stock is nuts, but hopefully I’ve given our trade enough room to the downside to compensate for the wild swings.
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