The three-plus week sell-off that began last month was ugly. Especially for growth stocks and former leaders.
Names like Nvidia (NVDA) and Palantir (PLTR) were the biggest beneficiaries of the latest phase of the bull market but came under major pressure, with some outright crashing.
But investors aren’t streaming for the exits. Instead, that hot money is rotating into other sectors.
Take a look at the charts of AbbVie (ABBV), Gilead (GILD) (and a number of other pharma plays).
It’s not just those two names, a lot of pharma companies are perking up.
Or you can look at international stocks such as Alibaba (BABA) or Deutsche Bank (DB), or some of the ETFs that hold those stocks such as China Internet (KWEB), Vanguard Europe (VGK), or iShares Germany (EWG) and you can see that money is rotating to long-ignored stocks and countries.
So maybe the play is to continue to chase international stocks via an international ETF like the Vanguard All World ETF (VEU), which is an index that seeks to get broad exposure across developed and emerging non-U.S. equity markets.
And if I were to do so via options, I might buy to open the VEU September 62 call for around $3. Though I do want to note options trading in VEU and similar “all world” ETFs like the iShares Core ETF (IEFA) is fairly illiquid.
But back to growth stocks, I do want to highlight that on March 4th and 5th, option activity ramped very bullish in Nasdaq stocks and, really, across the market. Here is a sample of the big bullish option activity made by the hedge funds and institutions I follow:
March 4:
Buyer of 27,000 Broadcom (AVGO) June 240/270 Bull Call Spread for $2.70 – Stock at 183
Buyer of 15,000 Broadcom (AVGO) July 250/300 Bull Call Spread for $3.75 – Stock at 188
Buyer of 10,000 Eaton (ETN) September 340/390 Bull Call Spread for $6.20 – Stock at 276
Buyer of 1,000 Astera Labs (ALAB) April 70 Calls for $6.90 – Stock at 66
Buyer of 1,000 Astera Labs (ALAB) April 75 Calls for $5.50 – Stock at 67
Buyer of 10,000 Schlumberger (SLB) August 45 calls for $1.45 – Stock at 39 (rolled back from August 47.5 calls)
Buyer of 10,000 Schlumberger (SLB) June 42.5 Calls for $1.60 – Stock at 39 (rolled back from June 45 calls)
Buyer of 2,000 Gilead (GILD) March 120 Calls for $0.97 – Stock at 115
Buyer of 1,800 Shopify (SHOP) July 90/140 Bull Call Spread for $15.50 – Stock at 100
Buyer of 4,000 Robinhood (HOOD) March 50 Calls for $2.20 – Stock at 47
March 5:
Buyer of 10,000 Pinduoduo (PDD) April 125 Calls (exp. 4/11) for $6.50 – Stock at 118
Buyer of 1,500 Deutsche Bank (DB) April 24 Calls for $0.95 – Stock at 23
Seller of 2,000 Crowdstrike (CRWD) April 280 Puts for $3.40 – Stock at 350 (trader willing to buy 200,000 shares at 280)
Seller of 10,000 Vertiv (VRT) May 70 Puts for $3.65 – Stock at 87 (trader willing to buy 1 million shares at 70)
Buyer of 100,000 Nvidia (NVDA) June 120 Calls for $12.15 – Stock at 115 (rolled from April 120 calls)
Buyer of 2,000 Johnson & Johnson (JNJ) January 185 Calls for $4.70 – Stock at 165
Buyer of 10,000 Starbucks (SBUX) March 115 Calls for $1.19 – Stock at 111.5
There are a couple things I like about this option activity …
First traders are buying the leaders in a big way via 42,000 Broadcom (AVGO) Bull Call Spreads and 100,000 NVDA calls.
Second, the list of stocks above is very diverse. There is tech option activity in AVGO/NVDA/CRWD/SHOP, as well as Oil (SLB), Finance (HOOD), Consumer (SBUX) and much more.
Finally, put buying across the market, which is a bearish trade, slowed down quite dramatically.
So, what are my thoughts on the market given all that I’ve noted above? I’m cautiously optimistic that the market pullback of the last couple weeks has neared its end.
