March 7, 2024
Marvell (MRVL) Earnings
Today after the market close Marvell (MRVL) will report earnings. Headed into the event, we are holding the final third of a position, having taken partial profits twice.
I am going to hold my position through earnings as the stock looks terrific and option activity remains wildly bullish.
And while I am going to hold my trade, there absolutely is risk in doing so as the stock has been on a big run, and should the company disappoint, the stock could fall. Also, as noted below, the options market is pricing in a potential move of $10 on earnings, which is crazy high for a stock like MRVL.
Because of that risk, if you would prefer to lock in your profit of approximately 90% ahead of earnings you must Sell to Close before the close of trading today.
MRVL - With the stock trading at 83, the options market is pricing in a move of $10 this week, or 73 to the downside and 93 to the upside.
Open interest is skewed bullish on a ratio of 1.9:1 call vs. put.
Skew is pricing in extreme downside and upside risk.
March 6, 2024
Position Update – Palantir (PLTR)
After a brief pullback two weeks ago, Palantir (PLTR) stock is trading higher by 12% today, and at a new high, after it was announced the company had won a new U.S. Army contract. This strong stock move has helped push our April calls to a potential profit of approximately 160%.
And into this stock move call buying activity in PLTR has swung wildly bullish yet again as calls are outpacing puts on a ratio of 5.2:1 today. Here is just a small sample of this call buying:
Buyer of 4,000 Palantir (PLTR) May 28 Calls for $1.88 – Stock at 24.8
Buyer of 10,000 Palantir (PLTR) June 35 Calls for $1.25 – Stock at 25.8.
As you can see via the trades above, these are not shorter-term/weekly call buyers paying $0.25 that I have little faith in. Instead, these are larger premium trades further out in time looking for the stock to move higher over the long term. The list of these trades that I like to see in PLTR could include another 20 such trades.
Big picture, I’ve very encouraged by the price action in PLTR as well as this call buying, and am going to hold my position as is.
Of note, PLTR will host an AI-related conference tomorrow which has the potential to move the stock even more in the short term (either up or down).
March 1, 2024
Scheduling Note and Positions Update
Please note, I will be traveling the next couple of days to attend a family funeral. What that means for Cabot Options Trader and Cabot Options Trader PRO services is I will update our portfolio below, but then there will not be a Weekly Review on Monday or Option Order Flow daily email until Wednesday morning.
Here is a breakdown of all of our positions, and it’s been a TERRIFIC week for our many trades (perhaps too good?):
Celsius (CELH) July 60 Call – This morning we locked in a profit of 134% on a third of our CELH position after the stock exploded higher on earnings on Thursday. I have high hopes that CELH is an emerging earnings star and our calls will continue to move higher in the months to come. Great trade if I don’t mind saying so myself!
Robinhood (HOOD) January 15 Call – HOOD is trading at a new high this morning and our calls are now at a potential profit of approximately 75%. I have debated taking partial profits again, though call buying activity continues to be very strong.
Li Auto (LI) June 40 Call – LI exploded higher on earnings earlier this week, we sold another piece of our position, and I am now trying to be patient with the final third as we have plenty of time until expiration. Essentially if China-related stocks can get in gear, LI could be a real leader.
Marvell (MRVL) August 70 Calls – MRVL is breaking out to a new high today and our calls are now at a potential profit of 45% ahead of earnings next week. Option activity remains VERY strong.
Nutanix (NTNX) April 37.5 Calls – NTNX is trading at a new high today after earnings earlier this week. Our position is now at a potential profit of nearly 500%.
Palantir (PLTR) April 19 Call – After a bit of a shakeout two weeks ago PLTR is now approaching its old highs again, and our calls are at a potential profit of 100%.
Permian Resources (PR) April 15 Covered Call – PR is the newest addition to the portfolio via a defensive covered call. Essentially, should PR stock close above 15 on April expiration we will walk away with a yield of 3.44% in just over a month.
Equal Weight ETF (RSP) June 158 Calls – The RSP is trading at a new 52-week high and our calls are now at a potential profit of 25%. This has been a slow and steady winner.
Snap (SNAP) August 17 Calls – SNAP is the worst stock in our portfolio, and my plan is to exit the trade on any real pop in the stock and our calls.
TJX (TJX) April 92.5 Calls – After an initial pop higher for the stock following earnings TJX has given up those gains as money races into hot stocks (essentially the rest of our portfolio). In my mind, this is normal rotation.
Taiwan Semiconductor (TSM) September 130 Calls – This morning we sold a third of our TSM calls for a profit of 27%. The stock looks great, option activity is strong, but as always, I’m going to stick to the system and lock in partial profits.
Financials ETF (XLF) March 33 Put – Our XLF puts are essentially a “back pocket” hedge against a steep market decline at this point.
February 29, 2024
Great Day for NTNX and CELH (for Now)
NTNX and CELH are both trading higher following earnings, which is great for our positions. Here is where we stand with each …
NTNX is trading higher by 3% following earnings last night. At current levels, our position is now at an approximate profit of 425%.
As is always the case when we have these big winning positions, I am going to continue to let the position run while at the same time raising our stop on our calls to protect some of these profits.
Our April 37.5 calls are now worth $24, and I am going to move my stop from $12, all the way up to $19.
CELH is trading higher by 10% today and at a new all-time high. At current levels, our position is now at an approximate profit of 70%.
My only gripe with CELH is that in early trade today the stock is seemingly moving $2 every minute which makes this move higher a bit hard to “trust.” Hopefully, the stock chills out (and doesn’t give up its gains) as the day progresses.
February 28, 2024
Nutanix (NTNX) and Celsius (CELH) Earnings
This afternoon and tomorrow morning are going to be super interesting for the portfolio as we have two more stocks reporting earnings (of note, TJX is trading higher by 1.2% this morning following “ok” earnings).
Let’s dive in …
Nutanix (NTNX) will report earnings today after the market close. Headed into the event our position is at a potential profit of approximately 360%.
I am going to hold my position through earnings as I think the stock looks great and option activity has been strong. However …
There is no question there is risk in holding NTNX through the announcement as the stock has been straight up for months, and should the stock fall, our DEEP in-the-money calls will move one-for-one with the stock to the downside (but also the upside should the stock rise). Because of that risk, I would have no issue if you wanted to ring the register on a piece of your position ahead of earnings.
NTNX - With the stock trading at 58, the options market is pricing in a move of $8 this MONTH, or 50 to the downside and 66 to the upside.
Open interest is skewed bullish on a ratio of 2:1 call vs. put.
Skew is pricing in extreme downside and upside risks.
Next up is …
Celsius (CELH) will report earnings tomorrow before the market open. Headed into the event our position is at a potential profit of approximately 37%.
I am going to hold my position through earnings as I think the stock looks great. However …
While you wouldn’t think a drink maker stock would be volatile, CELH stock regularly moves violently on earnings, having fallen 2% last quarter but also having had gains of 20% the two quarters before that. So, this stock can MOVE.
Because of the stock volatility risk, if you want to sell another piece of your position ahead of earnings, you must sell before the close of trade today.
CELH - With the stock trading at 67.5, the options market is pricing in a move of $8 this week, or 59.5 to the downside and 75.5 to the upside.
Open interest is skewed bullish on a ratio of 1.9:1 call vs. put.
Skew is pricing in extreme downside and upside risks.
February 27, 2024
TJX (TJX) Earnings
TJX (TJX) will report earnings tomorrow before the market open. Headed into the announcement the stock is now trading at a new high above 100, and our April 92.5 calls are at a potential profit of approximately 35%.
I am going to hold my position through the announcement as the stock looks terrific.
That being said, there is risk in holding our deep in-the-money calls as a stock decline on earnings would hurt our position. For that reason, if you want to de-risk ahead of the event you must Sell to Close another piece, or the entire position, before the close of trading today.
TJX - With the stock trading at 100, the options market is pricing in a move of $4 this week, or 96 to the downside and 104 to the upside.
Open interest is split evenly on a ratio of 1:1 call vs. put.
Skew is pricing in typical downside risk and upside interest.
February 26, 2024
Weekly Update
Despite some heavy selling pressures early in the week, the market rallied to close the week following Nvidia’s (NVDA) blowout earnings report that highlighted the growth potential of AI. By week’s end the S&P 500 had gained 1.2%, while the Dow rose marginally and the Nasdaq fell slightly.
Stocks on Watch
Having added TSM and HOOD to the portfolio in the last two weeks I am fairly open to adding any stock or sector to the portfolio if the market is in gear, option activity in that stock is strong, and the stock is performing well.
And the leader in terms of repeated bullish option activity last week was Starbucks (SBUX) which attracted several call buys on Thursday and Friday. Here are those trades:
Friday - Buyer of 1,200 Starbucks (SBUX) April 105 Calls for $0.50 – Stock at 96
Thursday - Buyer of 3,500 Starbucks (SBUX) May 100 Calls for $2.26 – Stock at 94.5
Thursday - Buyer of 7,000 Starbuck (SBUX) June 100 Calls for $3.27 – Stock at 95.5.
I like this call buying, but for now I may sit on the sidelines when it comes to new buys with SBUX as the stock has been stuck in the mud for months. That being said, if the bullish option activity continues to ramp, my intrigue will grow.
And finally, it’s hard to be bearish on the overall market when traders continue to buy big premium call positions in market leaders, including this $350 million call buy in NVDA, and the $21 million buy in MSFT below:
Friday - Buyer of 31,000 Nvidia (NVDA) May 720 Calls for $113 – Stock at 793 (rolled from March calls)
Thursday - Buyer of 23,000 Microsoft (MSFT) July 460 Calls for $9 – Stock at 411.
Volatility
The Chicago Board of Options Exchange Volatility Index (VIX) was mostly unchanged on the week, having closed at 14.
In terms of order flow, despite some market weakness on Tuesday and Wednesday of last week, especially in growth stocks, my options scanner never flipped bearish, which was encouraging throughout the selling. In fact, put buyers were fairly few and far between, and they never attacked the market leaders. This is one of the reasons we did not add puts to the portfolio despite some worrisome signs.
Option Order Flow was fairly mixed this past week as my Options Barometer came in at:
Tuesday – 5
Wednesday – 5
Thursday - 7
Friday – 5
Events for the Week to Come
It will be a fairly quiet week in terms of economic data releases with the biggest events being ISM and Consumer Confidence on Friday.
In terms of earnings, this week we will get a very diverse group of releases including Workday (WDAY) today, Lowe’s (LOW) Tuesday, salesforce.com (CRM), Snowflake (SNOW) on Wednesday, Elastic (ESTC) and Zscaler (ZS) on Thursday and many more.
What Traders are Saying
I have a love/hate relationship with taking partial profits. This is what I mean …
When we took partial profits of 24% on a third of our Nutanix (NTNX) calls, for example, and the stock raced higher in the weeks/months to come, and the balance of our calls are now at a potential profit of 385%, it kills me that we aren’t holding a full position.
However, last week was a perfect example of why we do take partial profits as NTNX (and other stocks in our portfolio) fell from their highs on Tuesday and Wednesday when the market was under pressure, and if we didn’t have those partial profits in the bank, I might have sold out of fear of deeper losses.
However, because we have a system of taking partial profits at 20-30% on the first third, and then 60-100% on the second third, we were able to ride out the short-term weakness we saw early last week. And that patience was rewarded as the Nvidia-fueled rally helped push NTNX and others in the portfolio back to higher levels.
Big picture, if we have a system that we stick to, I/we shouldn’t second guess taking partial profits, even if it turns out to be the wrong move in the long run. And as I always say when we lock in those early gains, hopefully those sales are massive mistakes and the stock and the balance of our position run much higher in the weeks/months to come.
Open Positions
Celsius (CELH) July 60 Call – Ahead of earnings on Thursday, CELH stock again made a run at a multi-month high last week. Of note, option activity remains very strong in the stock, including this trade from Tuesday:
Tuesday - Buyer of 3,500 Celsius (CELH) March 70 Calls (exp. 3/8) for $3 – Stock at 64.
Robinhood (HOOD) January 15 Call – HOOD is the newest addition to the portfolio via a buy of the January 15 call for $2.70. I really like the way HOOD stock is trading and option activity is very bullish. That being said, this stock is a bit crazy, so I would expect some ups and downs.
Li Auto (LI) June 40 Call – LI is trading higher by 10% this morning in pre-market trade following the release of its quarterly results. This position is certainly waking back up as the stock once again makes a run at the 40 level.
Marvell (MRVL) August 70 Calls – MRVL is all over the place day-to-day as the AI story gets hot, cold, and then hot again. And while the stock is moving up and down, option activity remains very strong including this buy from Wednesday:
Wednesday - Buyer of 3,500 Marvell (MRVL) August 77.5/95 Bull Call Spreads for $2.80 – Stock at 64.5.
Nutanix (NTNX) April 37.5 Calls – As noted above, our NTNX position is now at a potential profit of 385% ahead of earnings this Wednesday. The reaction to earnings will be interesting as the stock has been on a massive run.
Palantir (PLTR) April 19 Call – Somewhat disappointingly, PLTR didn’t explode higher along with the rest of the AI group late last week. Fortunately, we took partial profits of 90% a couple weeks ago so we can ride out some short-term volatility.
Equal Weight ETF (RSP) June 158 Calls – The RSP busted out to a new high on Friday and we took advantage of that strength to lock in a gain of 14.4% on a third of our position. While a 14% gain is hardly a home run, this is not necessarily a “grand slam position” (though I would love to be wrong about that).
Snap (SNAP) August 17 Calls – We took a loss on half of our SNAP calls last week, and I’m debating exiting the final half as the stock looks dreadful. That being said, we do have time until August.
TJX (TJX) April 92.5 Calls – TJX continued its slow-and-steady ascent towards the 100 level ahead of earnings on Wednesday. The stock looks terrific, though as always earnings are the great unknown.
Taiwan Semiconductor (TSM) September 130 Calls – Despite some day-to-day volatility TSM stock has been steady in comparison to its Semiconductor/AI peers. The 130 level in the stock has been sticky, but I hope the stock will finally break out from that level should the Nasdaq continue to strengthen.
Financials ETF (XLF) March 33 Put – Our XLF puts are essentially a “back-pocket” hedge against a steep market decline at this point.
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