Buy Call RSP

May 17, 2024
Two Trades: Sell your RSP June 158 Calls for $10.20 or more, and Buy the Walmart (WMT) January 65 Calls (exp. 1/17/2025) for $4.80 or less.

Today we are going to make two moves …

First, we are going to sell our RSP calls for a profit of approximately 33%, as time is becoming an issue with this trade, and I want to move the capital into a fresher idea.

To execute this trade you need to:
Sell to Close your RSP June 158 Calls.

Next …

As I noted yesterday, Walmart (WMT) surged higher on earnings yesterday, and following that report the company/stock is getting glowing reviews from Wall Street (more on that below). In addition, since that earnings move option order flow has been very bullish, and finally the price of WMT calls are extremely inexpensive. Let’s get involved with a January call position.

To execute this trade you need to:
Buy to Open the WMT January 65 Calls.

The most you can lose on this trade is the premium paid, or $480 per call purchased.

The risks I see in this trade are largely market and sector related. Also, it’s possible that WMT may need to “chill out” after its big move higher yesterday.

That being said, I like this set-up a lot, and to pay $4.80 for eight months of exposure to an earnings winner is a great risk/reward.

Finally, here are a couple of the analyst upgrades following earnings:

Morgan Stanley raised the firm’s price target on Walmart to 70 from 67 and keeps an Overweight rating on the shares. Top-line growth and market share gains validate Walmart’s investments in store and online, in grocery and across general merchandise, and with both lower and upper income shoppers.

BMO Capital raised the firm’s price target on Walmart to 75 from 65 and keeps an Outperform rating on the shares. The company’s Q1 results saw a “strong beat” and gross margin expansion above expectations across all three of its business segments. Walmart commentary and disclosures – including improving Ecommerce losses, strong gross margins and price positioning – provided further evidence that momentum may continue, Investors should give the retailer credit for creating a “significant moat” thanks to its omni-channel investments and high-margin initiatives.

March 21, 2024
Sell a Third of Existing Position: Sell a Third of your RSP June 158 Calls for $12.50 or more.

The RSP is breaking out to a new high today, and looks great. And while I like the way the market and the RSP are trading, we are going to stick to the system and lock in a profit of approximately 70% on the second third of our trade.

To execute this trade you need to:

Sell to Close a Third of your RSP June 158 Calls

February 23, 2024

Sell a Third of Existing Position: Sell a Third of your RSP June 158 Calls for $8.70 or more.

The RSP is breaking out to a new high today. And while I think new highs are bullish, this RSP trade is a slow and steady winner, not a home run play (though I would be thrilled if I’m proven wrong on that).

Let’s take a slow and steady profit of approximately 15% on a third of this trade and then go for much greater gains in the weeks/months to come.

To execute this trade you need to:
Sell to Close a Third of your RSP June 158 Calls

As is always the case when we take partial profits, we hope this initial sale is a mistake and the stock and our position trade higher in the months to come.

December 14, 2023
Buy the Invesco Equal Weight ETF (RSP) June 158 Calls (exp. 6/21/2024) for $8.50 or less.

The market is higher again today following the Federal Reserve meeting yesterday. The highlight of sorts from that meeting is that the Fed now sees the potential for three interest rate cuts next year.

And while it’s possible that the market has already run based on the assumption that the Fed would be cutting rates next year, because the market is so strong, I want to add exposure today.

We are going to do so via a buy of the Equal Weight ETF (RSP) which had underperformed the market most of the year (“only” up 12%) but has raced higher recently, and attracted this call buy today:

Buyer of 70,000 Equal Weight ETF (RSP) January 160 Calls for $1.40 – Stock at 157.5

To execute this trade you need to:
Buy to Open the RSP June 158 Calls

The most you can lose on this trade is the premium paid, or $850 per call purchased.

Please note this trade will work or fail mostly based on the market moving higher or lower.

Also, here is some of the description of the RSP, with the highlight being that the RSP “takes out” the overexposure of AAPL/MSFT/etc. in the S&P 500, as the top 10 companies in the S&P 500 make up over 30% of the index:

• The Index equally weights the stocks in the S&P 500^®
• This approach results in an exposure that tilts toward smaller companies in the S&P 500 Index.
• Relative to market cap indexes like the S&P 500, this reduces the concentration risk.
• RSP and the Index are rebalanced quarterly.