July 1, 2024
Stock on Watch – Nike (NKE)
Nike (NKE) fell 20% on earnings on Friday, closing at a new multi-year low. NOT pretty! However, into that decline today a trader/traders are building a series of bullish positions looking for a longer-term stock turnaround. Here are some of those trades:
Buyer of 1,800 Nike (NKE) June 80 Calls (exp. 2025) for $7.40 – Stock at 75
Buyer of 1,000 Nike (NKE) June 90/100 Bull Call Spread (exp. 2025) for $2 – Stock at 75
Buyer of 1,250 Nike (NKE) December 90 Calls (exp. 2026) for $10.35 – Stock at 75
Seller of 6,000 Nike (NKE) March 65 Puts (exp. 2025) for $2.60 – Stock at 75
As you can see, none of the call buys or put sales are looking for NKE to turn around any time soon. Instead, these are longer-term plays all expiring in 2025, or even out to 2026.
I am unlikely to get involved with NKE as the stock looks horrible.
However, IF I were looking to get involved with NKE, and wanted to cherry-pick from one of the trades above, I would lean towards the buyer of 1,800 June 80 calls (exp. 2025).
July 1, 2024
Weekly Update
Ahead of a holiday-shortened week, last week was mostly quiet as the S&P 500, Dow and Nasdaq were all down marginally.
And while the market may be slow again this week headed into the Fourth of July, this is the start of the third quarter, which could bring some volatility ahead of the presidential election.
Stocks on Watch
Interestingly to me, the big options players seemingly don’t anticipate the market’s advance will slow down anytime soon as there were many big call buys/rolls from last week in market leaders, including these trades:
Buyer of 64,000 Microsoft (MSFT) August 440 Calls for $23.60 – Stock at 450 (rolled from August 420 calls; $151 million in premium bought)
Buyer of 28,000 Meta (META) August 500 Calls for $40 – Stock at 515 (rolled up from August 470 calls; $112 million in premium bought)
Buyer of 4,700 Netflix (NFLX) September 640 Calls for $72.55 – Stock at 680 (rolled up from September 600 calls; $34 million in premium bought)
These are monster premium call buys/rolls looking for the “FAANG” stocks to keep racing higher in the months to come. And of note, there were several other big call buys in AAPL, GOOG, and NVDA as well.
And finally, I’m becoming more and more intrigued about jumping back into Palantir (PLTR) which we have successfully traded twice in recent months, following a strong rebound in the stock as well as this call buying activity from last week:
Wednesday - Buyer of 5,000 Palantir (PLTR) September 28 Calls for $1.40 – Stock at 24.5
Monday - Buyer of 4,000 Palantir (PLTR) January 30 Calls for $2.17 – Stock at 24
Volatility
The Chicago Board of Options Exchange Volatility Index (VIX) closed the week at 13, which is right in the middle of its recent sleepy range. Not much more to add regarding the VIX, other than I would anticipate it will remain low this week ahead of the Fourth of July holiday.
Option Order Flow was fairly mixed this past week as my Options Barometer came in at:
Monday – 5
Tuesday – 5
Wednesday – 5
Thursday – 6
Friday – 6
Events for the Week to Come
Before I dive into the Events for the Week to Come, I do want to note that I will be away from the trading screen on Wednesday, and the stock market will be closed Thursday. However, I will be back in action on Friday. Have a great Fourth of July!
In terms of the market, I would anticipate it will be a somewhat quiet week as many traders will likely take some time off for the Fourth of July. Though of note, the June Jobs Report on Friday morning could potentially move the indexes.
As for the earnings calendar this week, this is the slowest week of earnings reports that I can remember with Constellation Brands (STZ) the only company reporting that is of any interest (and that might be a stretch)!
What Traders Are Saying
With the first half of the year in the books, here are the gains for the major indexes:
With the first half of the year in the books, here are the gains for the major indexes:
S&P 500 higher by 14.5%
Nasdaq a gain of 18.1%
Dow rose 3.8%
Russell 2000 eked out a 1.7% gain
So, what might the rest of the year look like?
According to @RyanDetrick, looking at when the S&P 500 is up double digits at the midpoint of the year, what does the rest of the year historically look like for the index:
Full year never lower, and up 25.1% on avg.
Rest of year up avg. 7.7% (median 9.8%) and higher nearly 83% of time.
And on a super short-term basis, according to Goldman Sachs, the first 15 trading days of July have been the best two-week trading period for the S&P 500 since 1928, as shown below:
And despite the positive historical data above, of note from a Goldman Sachs Client Survey, the public (though high net worth public), is not very bullish:
While close to 40% still view Developed Markets Equities as their favorite long, only 1 in 4 see the SPX above 5,400 by year end, and most see it unchanged to lower from current levels, as shown below:
Open Positions
Cameco (CCJ) December 55 Calls – CCJ was marginally lower last week, though still looks mostly fine. Of note, option activity in CCJ and its peers swung fairly bullish Friday afternoon.
Robinhood (HOOD) January 15 Calls – HOOD gained 4% last week following an upgrade to Outperform from Wall Street Firm Wolfe Research. Also of note, on Tuesday a trader bought 7,000 Robinhood (HOOD) January 22 Calls (exp. 2026) for $7.45 – Stock at 21.5.
Hewlett Packard (HPE) January 22 Calls – HPE gained 2% last week and looks good. Of note, there has been a bit of call selling of large open positions, but it’s nowhere near enough for me to worry about our position.
Lyft (LYFT) August 16 Covered Call – On Friday into a bit of stock strength we sold the August 16 call for $0.67, which lowered our cost basis on our position to 14.63. Hopefully, this call sale is a mistake and LYFT stock rises well above 16 again in the months to come, so that we can walk away from this trade with a nice yield.
Marijuana ETF (MSOS) Stock – The MSOS had regained some ground as of late, but then lost most of that advance on Friday. If I were to speculate, and there are no political opinions here, I would guess that the Friday decline was tied to election odds moving following the Thursday debate.
Novo Nordisk (NVO) September 135 Calls – On Tuesday of last week we locked in a gain of just over 20% on the first third of our NVO calls which have made a very nice recovery from their lows.
I like the way NVO looks quite a bit, but given the choppy market conditions, I have to stick to the profit-taking system.
On Holding (ONON) January 42.5 Calls – ONON, and many of its retail peers, have started to bleed lower as of late, which is not the best for our bullish position. That being said, it’s hardly been a disaster, and a good day or two for the stock could bring our calls right back … especially since our position expires in January.
Taiwan Semiconductor (TSM) September 130 Calls – TSM pulled back some last week, which is not surprising given the monster stock run as of late. Regardless, our position is still at a monster profit.
Nasdaq ETF (QQQ) November 430 Puts – Not much new to add regarding our lone bearish position, which is protecting the portfolio against a steep market decline. Essentially this is an insurance policy we never want to collect on.
Walmart (WMT) January 65 Calls – On Monday of last week we closed a piece of our WMT calls for a profit of 64%. It’s always so interesting when a slow and steady stock like WMT yields such big profits. Such is the power of options when used correctly!
Wells Fargo (WFC) December 62.5 Calls – WFC looked awful Monday through Thursday and then exploded higher on Friday. Let’s see what the second half of the year has in store for financial stocks like WFC.
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