Category Archives: Uncategorized
November 8, 2024 Terry’s Tips Trade Alert #3 – Rising Tide Portfolio
November 8, 2024 Terry’s Tips Trade Alert #3 – Rising Tide Portfolio
We continue chasing delta higher:
BTC 1 COST 15Nov24 905 put (COST 241115P905)
STC 1 COST 20Dec24 905 put (COST 241220P905) for a credit of $13.20 (selling a calendar) (100%)
BTC 1 COST 15Nov24 935 call (COST 241115C935)
STO 1 COST 15Nov24 960 call (COST 241115C960) for a debit of $12.15 (buying a vertical) (100%)
Be prepared to change this (these) price limit(s) by $.05 or more in order to get an execution.
Happy trading.
Jon
June 5, 2024 Terry’s Tips Trade Alert – Wiley Wolf Portfolio
June 5, 2024 Terry’s Tips Trade Alert – Wiley Wolf Portfolio
We are closing put spreads to increase delta:
BTC 1 MSFT 21Jun24 402.5 put (MSFT240621P402.5)
STC 1 MSFT 19Jul24 435 put (MSFT240719P435) for a credit of $15.35 (selling a diagonal) (100%)
BTC 1 MSFT 21Jun24 405 put (MSFT240621P405)
STC 1 MSFT 19Jul24 430 put (MSFT240719P430) for a credit of $11.90 (selling a diagonal) (100%)
Be prepared to change this (these) price limit(s) by $.05 or more in order to get an execution.
Happy trading.
Jon
May 31, 2024 Terry’s Tips Trade Alert #3 – Rising Tide Portfolio
May 31, 2024 Terry’s Tips Trade Alert #3 – Rising Tide Portfolio
This completes rolling out and adds two call spreads:
BTC 1 COST 31May24 795 put (COST 240531P795)
STO 1 COST 21Jun24 800 put (COST 240621P800) for a credit of $13.45 (selling a diagonal) (100%)
BTO 1 COST 19Jul24 830 call (COST 240719C830)
STO 1 COST 21Jun24 830 call (COST 240621C830) for a debit of $7.00 (buying a calendar)
BTO 1 COST 19Jul24 810 call (COST 240719C810)
STO 1 COST 21Jun24 810 call (COST 240621C810) for a debit of $8.70 (buying a calendar)
Be prepared to change this (these) price limit(s) by $.05 or more in order to get an execution.
Happy trading.
Jon
March 21, 2023 Terry’s Tips Trade Alert – Honey Badger Portfolio
March 21, 2023 Terry’s Tips Trade Alert – Honey Badger Portfolio
We are adding a spread to raise delta:
BTO 1 QQQ 19May23 310 call (QQQ230519C310)
STO 1 QQQ 31Mar23 319 call (QQQ230331C319) for a debit of $11.45 (buying a diagonal)
Be prepared to change this (these) price limit(s) by $.05 or more in order to get an execution.
Happy trading.
Jon
It’s Getting Cold in Burlington
September 6, 2022
Burlington Stores (BURL) reported earnings on August 25 that beat on profits but missed on revenue. Same-store sales fell 17%, more than analysts expected. The reasons should sound familiar by now – consumers coming under increasing price pressures and too much inventory. More significantly, BURL slashed its quarterly and full-year earnings forecast.
Analysts, as usual, are right on with their assessment of the stock. Despite the price being cut in half this year, BURL has an average “buy” rating. I’m not sure what chart they’re looking at. In fact, there are more “buy” and “strong buy” ratings now than in June. Go figure. To their credit, most analysts lowered their price targets for the off-price retailer. But the average target of $176 is still 23% above Friday’s close.
The stock was hammered after the report, dropping 10% to fall below both the 50-day (blue line) and 20-day (red line) moving averages. And it hasn’t recovered since then. We are thus playing a bearish credit spread with the short call (green line) sitting on the 20-day moving average, which is rolling over. Thus, the stock will have to break above two points of resistance to move the spread into the money.
If you agree that BURL will struggle to break through resistance, consider the following trade that relies on the stock staying below $155 through expiration in seven weeks:
Buy to Open the BURL 21Oct 160 call (BURL221021C160)
Sell to Open the BURL 21Oct 155 call (BURL221021C155) for a credit of $1.55 (selling a vertical)
This credit is $0.05 less than the mid-point price of the spread at Friday’s $143.46 close. Unless BURL falls quickly, you should be able to get close to that price.
The commission on this trade should be no more than $1.30 per spread. Each spread would then yield $153.70. This trade reduces your buying power by $500, making your net investment $346.30 per spread ($500 – $153.70). If BURL closes below $155 on October 21, both options will expire worthless and your return on the spread would be 44% ($153.70/$346.30).
Watch for the Bear Trap
Zurich-based Chubb Limited (CB) is the world’s largest publicly traded property and casualty insurance company. CB reported earnings this week that topped estimates. But the market wasn’t sure how to react, as analysts offered a mix of target price increases and decreases. What’s clear, however, is that analysts are overwhelmingly bullish toward CB, as 84% give the stock a buy or better rating. Perhaps this is due to the “conventional” wisdom that insurance companies benefit from rising interest rates.
But analysts would be well advised to check out CB’s chart. Despite the solid earnings numbers, the stock ended the week flat. Moreover, it failed to break out of a four-month downtrend that has seen the stock drop 14%. This slide has been guided by the 20-day moving average (blue line in chart), which hasn’t allowed a daily close above it since early June. Above that lies the 50-day moving average (red line), which has yet to be tested. It sits at the $196 level, just a point above the short strike of our call credit spread. At its current slope, it will fall below this strike in the coming week. Thus, the stock will have to pierce two points of resistance to move into the money.
If you agree that the 20-day moving average will continue guiding CB lower, consider the following trade that relies on the stock staying below $195 (green line) through expiration in seven weeks:
Buy to Open the CB 16Sep 200 call (CB220916C200)
Sell to Open the CB 16Sep 195 call (CB220916C195) for a credit of $1.40 (selling a vertical)
This credit is $0.02 less than the mid-point price of the spread at Friday’s $188.64 close. Unless CB drops quickly, you should be able to get close to that price.
The commission on this trade should be no more than $1.30 per spread. Each spread would then yield $138.70. This trade reduces your buying power by $500, making your net investment $361.30 per spread ($500 – $138.70). If CB closes below $195 on September 16, both options will expire worthless and your return on the spread would be 38% ($138.70/$361.30).
Dressing Down this Stock
Levi Strauss (LEVI) was one of the only well-known names that reported earnings this week ahead of the banks kicking off the season next week. The company beat estimates on both revenue and earnings, posting higher sales while avoiding – perhaps temporarily – excess retailer inventory and slowing consumer spending. The company cited a shift to more casual clothes from the burgeoning remote work crowd.
That makes sense, but why wouldn’t that have applied during the past two years? The stock is on a slide that’s covered 46% in the past 14 months. It’s down 34% this year. And all it could manage after a stellar earnings report was a meager 1% gain after peaking 6.6% higher. More importantly, the shares were soundly rejected by the declining 50-day moving average at the $17.50 level. This trendline has rejected numerous rally attempts, allowing just a handful of closes above it since it turned south in January.
This trade is a bet that LEVI’s downtrend will continue. Earnings and the brief respite they brought are in the past. Now the company must face what all consumer stocks are facing – inflation fears, supply chain issues and a worried customer. Plus, the stock has to contend with its 50-day moving average. Note that the short call of our bearish call spread is 3% above the 50-day, so the stock will have to power through this resistance to move the spread into the money.
If you agree that LEVI will continue its slide under the weight of its 50-day (blue line), consider the following trade that relies on the stock staying below $18 (red line) through expiration in six weeks.
Buy to Open LEVI 19Aug 20 call (LEVI220819C20)
Sell to Open LEVI 19Aug 18 call (LEVI220819C18) for a credit of $0.55 (selling a vertical)
This credit is $0.05 less than the mid-point of the option spread when LEVI was trading at $16.58. Unless the stock drops quickly from here, you should be able to get close to this amount.
Your commission on this trade should be no more than $1.30 per spread. Each spread would then yield $53.70. This trade reduces your buying power by $200 and makes your net investment $146.30 ($200 – $53.70) for one spread. If LEVI closes below $18 on August 19, both options will expire worthless and your return on the spread would be 37% ($53.70/$146.30).
Just Do It … or Not
Nike (NKE) reported earnings on Monday that beat on the top and bottom lines. But many were not impressed, citing disappointing gross margin guidance, among other metrics. The stock was hit with a slew of target price downgrades, though that’s been the norm for all stocks as analysts make feeble attempts to catch up with the bear market. Nevertheless, saying analyst reactions were mixed would probably be an overstatement. The stock reacted by crashing to a two-year low and falling 45% from its November high. Given the current market environment and the latest numbers, it’s difficult to make a bullish case for the stock over the near term. So, we won’t. That said, we’re giving plenty of room on the upside, using a call spread with the short call sitting just below the declining 20-day moving average (red line), which twice rebuffed rally attempts in June. The 50-day moving average (blue line) is also in play as potential resistance.
If you agree that NKE will continue its overall downtrend, consider the following trade that relies on the stock staying below $110 (green line) through expiration in seven weeks.
Buy to Open NKE 19Aug 115 call (NKE220819C115)
Sell to Open NKE 19Aug 110 call (NKE220819C110) for a credit of $1.05 (selling a vertical)
This credit is $0.02 less than the mid-point of the option spread when NKE was trading at $101. Unless the stock drops quickly from here, you should be able to get close to this amount.
Your commission on this trade should be no more than $1.30 per spread. Each spread would then yield $103.70. This trade reduces your buying power by $500 and makes your net investment $396.30 ($500 – $103.70) for one spread. If NKE closes below $110 on August 19, both options will expire worthless and your return on the spread would be 26% ($103.70/$396.30).
No Garden Party
Darden Restaurants (DRI) reported earnings this week that beat on both revenue and profits. But the owner of such popular chains as Olive Garden, LongHorn Steakhouse and Capital Grille was beset by higher food, beverage and labor costs even as customers are more comfortable eating out again.
Analysts weighed in with a plateful of target price decreases, although there were no rating downgrades. This has been common for most stocks, as analysts re-adjust their targets amid the 2022 swoon. Nevertheless, some targets are now barely above the current share price, which does not inspire confidence about DRI’s near-term price action.
The stock reacted with a small increase on Thursday and then popped 3.6% on Friday. But most stocks surged on Friday, so it doesn’t appear that earnings gave DRI a boost. Although the stock is up 8% off a 52-week low hit last week, it is bumping into its 20-day moving average at the 120 level (red line in chart). The 50-day moving average lies overhead at the 125 level (blue line). Although DRI has managed to overtake the 50-day at times, it ultimately retreats into a tailspin. Given this history, we’re using a bearish call credit spread with the short call strike (green line) sitting right on the 50-day.
If you agree that DRI will continue its overall downtrend, consider the following trade that relies on the stock staying below $125 through expiration in eight weeks.
Buy to Open DRI 19Aug 130 call (DRI220819C130)
Sell to Open DRI 19Aug 125 call (DRI220819C125) for a credit of $1.50 (selling a vertical)
This credit is $0.05 less than the mid-point of the option spread when DRI was trading at $120. Unless the stock drops quickly from here, you should be able to get close to this amount.
Your commission on this trade should be no more than $1.30 per spread. Each spread would then yield $148.70. This trade reduces your buying power by $500 and makes your net investment $351.30 ($500 – $148.70) for one spread. If DRI closes below $125 on August 19, both options will expire worthless and your return on the spread would be 42% ($148.70/$351.30).
Channel This
Roku (ROKU) is a stock many believe is in play as a takeover candidate. Netflix and Disney are potential suitors, among others. Whatever the rumor or sentiment, the stock has been flat for the past seven weeks, which is saying something. In fact, since April 27, ROKU is down 2.7% while QQQ has fallen more than 13%.
There’s no denying that ROKU has been a spectacular flop for the past year. The shares are down a whopping 83% from their July 2021 high. But the stock has held up well over the past couple of months with takeover rumors in the air. It may not be advancing, but it’s not falling either. Moreover, the stock appears to have found solid support in the 72-73 area, the site of a two-year low.
One way to see how the market feels about a stock is by looking at equidistant out-of-the-money put and call prices. Currently, calls are trading for more than their corresponding puts, suggesting that the market sees more risk to the upside. That is highly unusual in this market, where most everything has richer put prices. We are therefore trading a put credit spread with the short put strike below the recent two-year low level.
If you agree that ROKU is in play and will continue sideways at worst, consider the following trade that relies on the stock staying above $70 through expiration in six weeks. Note that ROKU is scheduled to report earnings the day before expiration.
Buy to Open ROKU 29Jul 65 put (ROKU220729P65)
Sell to Open ROKU 29Jul 70 put (ROKU220729P70) for a credit of $1.50 (selling a vertical)
This credit is $0.05 less than the mid-point of the option spread when ROKU was trading at $82.42. Unless the stock surges quickly from here, you should be able to get close to this amount.
Your commission on this trade should be no more than $1.30 per spread. Each spread would then yield $148.70. This trade reduces your buying power by $500 and makes your net investment $351.30 ($500 – $148.70) for one spread. If ROKU closes above $70 on July 29, both options will expire worthless and your return on the spread would be 42% ($148.70/$351.30).
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