This Is What Keeps Me Up At Night

September 7, 2021

Biden-China

If there’s one thing that worries me, it’s China.

For decades now, we have thought China was changing their tune… They were finally embracing western capitalism.

Over the last few months, there has been a dramatic change in the messaging coming out of China. 

It’s a HUGE policy shift.

Think about how much profits, growth expectations, and supply chain processes tied to China are built into the S&P500.

Yet, Wall Street doesn’t seem to care.

If tariffs are a 20-foot wave coming at us, a policy shift away from free markets is a tsunami.

But it goes beyond this.

China is taunting us.

Prime Minister Xi is making blatant statements through the media, almost laughing at Western culture. The gist: Westerners are idiots that are hooked on drugs, video games, and push paper to make their livings. 

Think about how fast China entered Afghanistan and shook hands with the Taliban 15 minutes after we leave in embarrassing fashion in front of the whole world.

Sure, it doesn’t seem to matter right now.

But at some point, there will be a chess move played by China that makes the next decade very clear to the markets.

And on that day, it will not feel good.

Remember, AAPL went down 40% in the 4th quarter of 2018. 
40%!!

Why? 

Trump was talking about a few Tariffs. 

Remember, this is chess, not checkers!

Here's 3 interesting trades I'm seeing today:

UNUSUAL OPTIONS ACTIVITY

1. Your Daily Meme Stock Rip!  

2. The S&P500 Add is Pushing THIS Stock

3. Bitcoin’s Slide Puts Pressure HERE

Let’s get started...


UNUSUAL OPTIONS ACTIVITY CLOV

Your Daily Meme Stock Rip!  

Unusual Options Activity in CLOV on 090721

First day of the week and another meme stock getting attention. Not sure what’s the pattern to choose these stocks, but it seems clear to me there is a puppet master or two behind the scenes. 

Clover Health is a Chamath Palihapitiya-backed stock that rocketed in June only to collapse behind a short report by Hindenburg Research. Here’s a good outline of the allegations:

The company hasn't disclosed that it's under investigation by the U.S. Department of Justice (DOJ).
The company's sales are driven by misleading marketing practices.
The company's Clover Assistant software "deceives the healthcare system" and "poses a significant regulatory risk."

That said…

Walmart teamed up with them in Georgia to test it out. I suspect if CLOV technology works in the test markets then WMT would be interested across the country. So, we’ll see. 

Here’s the chart:

CLOV Chart 090721

You obviously see that short squeeze induced rally back in June. 

After that, CLOV completely broke down trading sub-$10, before finding a floor at $8.

Today, the stock recaptured the 50 dma today on good volume, approaching good resistance at $10. If it breaks $10, then $12 -$13 is not out of the question.

Options volumes are pointing there as well.

Unusual Options Activity CLOV 090721

The CLOV September options are seeing huge Call buying in various strikes. The focus seems to be on that $10 Call. Notice the RR$ on these options, and depending on which expiration the RR$ will change (they are much higher now):

Sep-10 = $11.40
Sep-17 = $11.90
Sep-24 = $12.42
Oct-01 =$12.72
Oct-08 =$13.06
Oct-15 =$13.39

Net-net, the market is looking for a big move here in the coming weeks. 

But be careful. 

While a few (i.e. SPRT) have soared, a higher percentage of these meme names have failed over the last month, or have not given the big follow-through that makes buying calls profitable. 

In those cases, the first day (or two) move saw most of the gains.


UNUSUAL OPTIONS ACTIVITY MTCH

The S&P500 Add is Pushing THIS Stock

MTCH Unusual Options Activity 090721

The Match Group (MTCH) has had some run since we saw that huge Put Seller three weeks ago. Their timing was very good, one-day from the low.

News was released late-Friday that MTCH was chosen to enter the S&P500 effective September 20th.  

“Match Group Inc. (NASD:MTCH) will replace Perrigo Company plc (NYSE:PRGO) in the S&P 500, Perrigo Company will replace WW International Inc.” 

The stock is up almost 7% on the news.

MTCH Chart 090721

MTCH is firmly between $130 and $170, digesting the large move from the $45 pandemic lows last year.

Today’s options volume is focused on that S&P500 inclusion date.

Unusual Options Activity MTCH 090721

The inclusion into the S&P500 means that there will be stock to buy prior to the effective date by the investment banks (under an agreement). The banks then sell the stock at the closing price on Friday, September 17th, to the S&P500 funds. 

The banks take the risk on any stock they purchase between today and September 17th. The idea is that the banks will push the stock way up on the last day to make money on the trade. 

Investors play options ahead of that date because, on occasion, you get a very large move in the stock going into the S&P500.

That’s why there are buyers of the MTCH September 17th $160 and $165 Calls. 

Notice the RR$’s, they indicate a Target Stock Price around $170-175.


UNUSUAL OPTIONS ACTIVITY RIOT

Bitcoin’s Slide Puts Pressure HERE

Bitcoin Chart 090721

That’s a 1-year chart of Bitcoin, from $10k to $63.5k to $30k to $52.5k and dropping 10% today to $47k on a quick u-turn. 

If you have held since $10,000 or lower, then you deserve a medal. 

It’s impressive.

That said, it looks like a downturn here could cause some trouble. It would make a lower long-term high which you don’t like to see. 

RIOT is a bitcoin mining company. The chart also appears somewhat weak.

RIOT Chart 090721

RIOT's last push higher couldn’t break $40 to the upside, and now the stock is breaking lower through the 50 and 200dma.

There’s a lot of options volume trading in the weeklies. Keep in mind there are always Call buyers in RIOT.

Unusual Options Activity RIOT 090721

But it appears that there was a large $37 Call Seller earlier (likely closing). In addition, Put Options are more active than usual, specifically in the $30 and $31 Puts.

Where Bitcoin goes, RIOT goes.

And my guess on a move lower, this time Bitcoin breaks that $30k level.

That means RIOT sees the low $20s. But, I think that type of move will take more than a week.

Look at the RR$ on the RIOT October $30 Puts… $23.13!

Now go make some money!

Best,
Felix

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