January 13, 2025
Weekly Update
Interest rate worries continued to weigh on the market last week as the S&P 500 lost 1.6%, the Dow fell 1.5%, and the Nasdaq declined by 2.3%. This week will have plenty of market-moving events, including the start of earnings season, so expect continued volatility.
Stocks on Watch
Last week we were finally stopped out of our Palantir (PLTR) position after months of riding the stock higher. And while we no longer own a position in PLTR, I am going to continue to closely watch the stock action and option activity as it is often a great clue for risk on/off when the stocks that led the advance start to weaken, or more positively find support.
And on that note, PLTR option activity definitely took a bearish turn late last week as the stock was falling, including this trade from Friday:
Buyer of 2,000 Palantir (PLTR) May 45 Puts for $2.40 – Stock at 65.5.
I’m not yet ready to short PLTR as there has been big call buying as well … but I will be watching it.
In terms of potential buys of strong stocks, both eBay (EBAY) and Delta Airlines (DAL) had strong weeks last week as DAL crushed earnings and EBAY shares rose on news that Meta would allow eBay listings on its Facebook Marketplace. Following those positive stock moves, option activity was strong including these trades:
Buyer of 2,400 eBay (EBAY) March 65 Calls for $4.50 – Stock at 66.5
Buyer of 6,000 Delta Airlines (DAL) March 67.5 Calls for $4.65 – Stock at 67.5 (rolled from February 60 calls).
It is unlikely I’m going to buy DAL, as we already own a JETS position. But if we didn’t own the JETS, DAL would be near the top of my buy list.
EBAY is more interesting to me, as the stock broke out on Wednesday following the company news, though it did give back some of those gains on Friday.
Finally, there was big call buying in the Biotech ETF (XBI) on Friday ahead of the big industry event this week (see “Events for the Week to Come” below for more details). Here are those trades, and then some more of my thoughts.
Buyer of 2,000 Biotech ETF (XBI) January 93 Calls for $0.47 – Stock at 89
Buyer of 6,000 Biotech ETF (XBI) January 90 Calls for $1.50 – Stock at 89.5.
These trades are likely a play on takeovers or data releases events at the industry event this week, which I’ve seen nearly every year I’ve been a trader.
Volatility
The Chicago Board of Options Exchange Volatility Index (VIX) closed the week at 19.5. This is the highest level for the VIX since mid-December … and it makes sense as the indexes have been under pressure, and since Christmas the S&P 500 has seen four declines of more than 1%. Essentially, a weak market and day-to-day market volatility will almost always trigger higher price for options.
Option Order Flow was fairly mixed this past week as my Options Barometer came in at:
Monday – 5
Tuesday – 5
Wednesday – 5
Friday – 5
Events for the Week to Come
This is going to be a busy week for market-moving events. Here is what I mean.
The “big” Retail conference of the year will be held Monday through Wednesday of this week. Expect nearly every retailer/restaurant/consumer-related company to present, with many releasing holiday numbers as well as guidance. These stocks will be moving! (If you have interest in the schedule for this conference, “Google search” ICR Conference and there is a tab with the full presentation schedule.)
Also, the “big” Healthcare/Pharma/Biotech conference of the year will be held Monday through Thursday this week. Nearly every year there are several takeovers or big data drops from this conference. If you have interest in this event, it is the JPMorgan Healthcare Conference (though of note, they don’t publicly release the schedule of presentations).
Next up is inflation data via the Producer Price Index (PPI) on Tuesday and Consumer Price Index (CPI) on Wednesday. With inflation concerns being front and center in traders’ minds, these are going to be market-moving events.
And finally, earnings season kicks off this week, mostly led by the Financials (C/JPM on Wednesday, and GS/BAC/MS on Thursday) Here is the full list of companies reporting:
What Traders are Saying
As longtime Cabot Options Traders know, every year I make the same prediction for the market’s year-end returns … based strictly on historical averages, I always predict the S&P 500 will rally somewhere between 10-15%. I’m really going out on a limb with this prediction (I’m laying the sarcasm on heavily).
And it appears the best and brightest from Wall Street mostly agree with me as Bloomberg compiled the year-end targets from the top investment firms below, and as you might guess, the average target of those Wall Street geniuses is … 12.3%!
Open Positions
Robinhood (HOOD) January 15 Call – Despite the market pulling back, HOOD remains within striking distance of its highs and looks terrific. That being said, because this week is the expiration of January options, we will be selling our position in the coming days.
Corning (GLW) May 47 Calls – GLW looks “OK,” much like the market. Not much more to add other than option activity remains strong.
On Holding (ONON) January 42.5 Calls – On Tuesday of last week we closed the final piece of our ONON position for a profit of 101%. I am open to getting back into a position in ONON if the stock and option activity get in gear.
Oracle (ORCL) March 160 Calls – ORCL is really starting to test my patience and I’m “flirting” with the idea of selling the last piece of our March 160 calls, and then moving this capital into a fresher idea (maybe MRVL, CRDO, DECK, etc.).
Palantir (PLTR) January 26 Calls – On Tuesday of last week we closed the final piece of our PLTR position for a profit of 864%. Much like ONON above, should PLTR option activity and stock action point to higher prices to come, we could get back into a PLTR position.
Occidental Petroleum (OXY) March 52.5 Calls – OXY continued its three-week winning streak as oil stocks have been the strongest sector in early 2025. Option activity has been very strong in OXY throughout this run.
Rocket (RKT) March 20 Calls – RKT is still horrible as interest rates are killing the housing-related stocks.
Financials ETF (XLF) June 50 Calls – Having chopped around the last three weeks the XLF got hit on Friday ahead of the big week for Financials’ earnings reports. Not ideal for our trade, though because our calls don’t expire until June I’m hardly panicking.
Jets ETF (JETS) January 26 Calls (exp. 2026) – Following blowout earnings from DAL late last week the JETS broke out to a new high and looks terrific. The rest of the sector will report earnings in the next two weeks.
Sofi (SOFI) July 16 Calls – SOFI got hit late last week as the market theme overwhelmingly shifted to “risk off.” Much like what I wrote about the XLF above, because we have so much time until expiration I’m not too concerned about this trade (for now).
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