February 28, 2025
GLW Option Activity and BP Stock on Watch
This has not been the best week for the market (to say the least!) and stepping back, it’s been a pretty terrible month as the Nasdaq is down more than 6% in February which is its worst performance since February 2020 (heart of Covid).
Not surprisingly, we own a couple stocks that have been caught up in this meltdown (MRVL has not been great!), while others have held up nicely (XLF, SBUX have stood out).
One stock that has pulled back but has hardly crashed is Corning (GLW) which has given up its big earnings move, but today is attracting a big bull call spread buy. Here is that trade:
Buyer of 22,000 Corning (GLW) November 60/70 Bull Call Spread for $1.53 – Stock at 49.5.
Like most stocks, GLW looks suspect, but as I noted above the stock has hardly fallen apart. And with this big bull call spread buyer I want to give this trade a bit more time.
Moving on to next buy candidates, I am growing intrigued by BP (BP) which popped earlier this month on news that activist investor Elliot Investment Management had built a stake of almost 5% in the stock. Elliot is a no-nonsense activist who has historically agitated for improved shareholder value.
Following the initial stock pop on the Elliot involvement, BP has given up nearly half of those gains. However, yesterday and today a call buyer/buyers have been building big call positions. Here are those trades:
Today - Buyer of 10,000 BP (BP) March 34 Calls for $0.57 – Stock at 33
Yesterday - Buyer of 12,000 BP (BP) April 34 Calls for $0.97 – Stock at 33.2.
I’m going to continue to watch out for further call buying activity, and if this bullish option activity continues, we could get involved with BP with a call that has a bit more time than those calls noted above.
February 26, 2025
CSCO, PLTR, NVDA and Other Market Thoughts
As I’ve mentioned several times in the last three weeks, I continue to closely watch Cisco (CSCO) as the stock looks great, and more importantly, option activity remains very strong. If the market wasn’t so weak (led lower by growth stocks), I likely would have bought by now. However …
Growth stocks have been decimated in the last five days. It’s been ugly, and some might even describe the price action in countless hyper-growth names as a mini-crash.
So, the question in terms of CSCO is will the best-looking stocks continue to hold up and then extend higher if the market firms up? Or will they eventually succumb to the selling pressure that is hitting the rest of the Nasdaq? For now, I am sitting on the sidelines when it comes to CSCO.
Speaking of growth stocks under pressure, following Palantir (PLTR) earnings that saw the stock rip as high as 107, I wrote that I would love to see the stock pull back normally to 100, chill out for a couple days, and then we would buy.
The next day PLTR pulled back to 100 and then exploded in the following days to a high of 125. I had missed the buy.
Fast forward to the last two weeks and PLTR stock has been hit hard, along with most growth stocks, and has fallen from 125 to 89, which is $11 below the 100 level I was interested in buying. So why am I not buying it $11 below my original buy level?
To be open, I would much rather buy PLTR at $95 or $100 in a strong market environment than at $88 in such a dicey market. I know that statement is somewhat counterintuitive, but I think the odds of success are better paying a higher price for PLTR in the right market than paying a lower price in a rough market.
Finally, and this is the big event of the week, Nvidia (NVDA) will report earnings today after the close, which will likely set the tone for the market for the next couple of days. Here is what the options market is pricing in in terms of risk.
NVDA - With the stock trading at 130, the options market is pricing in a move of $12 this week, or 118 to the downside and 142 to the upside.
Open interest is skewed bullish on a ratio of 1.2:1 call vs. put.
Skew is pricing in normal downside fear and upside interest.
February 24, 2025
Weekly Update
After notching an all-time high earlier in the week, the S&P 500 and its index peers came under intense selling pressure to close the week. By week’s end, the S&P 500 fell by 1.7%, while the Dow and Nasdaq both lost 2.5%.
Stocks on Watch
Last week’s market rout definitely raised some questions about new buys for the portfolio. That being said, I’m always hunting for the best-looking stocks and option activity for when the bulls take back control. That brings me to …
Cisco Systems (CSCO) pulled back marginally last week, which is a good sign for the stock in a tough market, and call buyers continue to build upside positions, including these trades from Thursday:
Buyer of 1,500 Cisco (CSCO) January 67.5 Calls for $4.75 – Stock at 64.5
Buyer of 1,000 Cisco (CSCO) May 67.5 Calls for $1.50 – Stock at 64.5
CSCO is at the top of my list for a new buy given the strong option activity the last three weeks, IF the market can get back in gear.
Speaking of a tough/weak market, defensive stocks were the leaders last week, and not surprisingly, defensive plays (big pharma/consumer staples) attracted call buying. Here are those trades:
Thursday - Buyer of 2,250 Gilead (GILD) January 125 Calls for $4.90 – Stock at 109
Friday - Buyer of 2,700 Colgate Palmolive (CL) March 90 Calls for $1.75 – Stock at 90
GILD broke out on earnings two weeks ago, well before the market came under pressure, and looks great after being a bit of a mess for years.
CL, on the other hand, fell hard on earnings two weeks ago and doesn’t look great, though if traders are looking to play defense, CL is the classic play.
Volatility
The Chicago Board of Options Exchange Volatility Index (VIX) closed the week at 18, which is up from the previous week, but is hardly screaming panic given the meltdown in plenty of stocks last week. Also, if the rumored “new coronavirus” was a big deal, I would think the VIX would have rallied to 25-30 last week.
Option Order Flow was fairly mixed this past week as my Options Barometer came in at:
Tuesday – 5
Wednesday – 5
Thursday – 5
Friday – 5
Events for the Week to Come
This week will be mostly quiet on the macroeconomic data front outside of the PCE Prices (inflation) data on Friday.
And while earnings season has slowed down, there are plenty of interesting reports, led by Nvidia (NVDA) on Wednesday, as well as Home Depot (HD), Cava (CAVA) and Workday (WDAY) on Tuesday, Lowe’s (LOW), Salesforce (CRM) and Snowflake (SNOW) on Wednesday, and Dell (DELL) on Thursday.
What Traders Are Saying
The growth stock selloff and general market weakness, while not fun, were not my biggest frustrations from the last two weeks. My biggest disappointment was a trade that I missed out on …
Intel (INTC) has been a total disaster for years. However, every once in a while, the stock would show promise and option activity would heat up. Yet every single time the stock would fail yet again.
So, when call buying again picked up steam two weeks ago, I noted the bullish activity but largely dismissed it as just another attempt to bottom-tick the long-suffering INTC shares.
Well, this time INTC stock finally busted out of its awful trading range and rallied from 19 to a high of 27.5. I was furious with myself for not buying … but I also wasn’t.
If I had bought INTC calls every time that I had picked up on similar option activity over the last five years, I would be broke. Essentially, other than the time we rode INTC calls to a monster profit in 2024, seemingly every other surge in call buying has been a failure. So I was “ok” missing out on this trade … not really, but I can live with that decision.
Open Positions
Corning (GLW) May 47 Calls – GLW pulled back marginally last week though, big picture, held up nicely in the face of a market sell-off. Our position remains in great shape.
Grab Holdings (GRAB) January 5 Calls – GRAB is the newest addition to the portfolio, having bought the January 5 calls for $1.45. While this is a bit of a speculative buy, option activity was just too strong for me to pass up, and without a bit of risk, there can’t be big reward.
Marvell (MRVL) June 115 Calls – MRVL was mostly unchanged last week though did get hit on Friday with most growth stocks. Option activity remains strong, despite the stock’s choppiness.
Occidental Petroleum (OXY) March 52.5 Calls – OXY rallied nicely on earnings last week though did pull back from its highs as the week progressed. I may sell another piece or the entire position soon as time is running out on our trade very quickly.
Rocket (RKT) March 20 Calls – Like I said recently, it will take a “miracle” for RKT to get back above 20 … perhaps that miracle will come on Thursday when the company reports earnings (but I doubt it).
Financials ETF (XLF) June 50 Calls – Having looked fantastic for weeks, the XLF finally came under pressure to close last week. That being said, I think the group still looks great and our trade is in good shape.
Jets ETF (JETS) January 26 Calls (exp. 2026) – Having hung out around the 26 strike for weeks, the JETS got hit hard on Friday as rumors of a new coronavirus in China circulated through the market. Hopefully, this does not become a “real thing,” and the JETS shakes off this rumor.
Sofi (SOFI) July 16 Calls – Much like most growth stocks, SOFI got hit hard late last week, which is discouraging, especially after a strong previous week and big call buying which is noted below:
Thursday - Buyer of 4,000 Sofi (SOFI) January 15 Calls for $4.10 – Stock at 15.5
Tuesday - Buyer of 6,000 Sofi (SOFI) September 27 Calls for $1.01 – Stock at 17
Tuesday - Buyer of 2,000 Sofi (SOFI) June 18 Calls for $2.02 – Stock at 16.80
Starbucks (SBUX) January 110 Calls – SBUX traded at a new high above 114 on Friday before it got pulled down when the market truly imploded that afternoon. Big picture, the stock looks great.
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