Unusual Options Activity in AA stock, PLTR and LCID

December 22, 2021

I hope everyone has a Happy Holiday!

My family is coming into town and so I will be back on Monday.

Enjoy the weekend.


1. New Highs For THIS Inflationary Stock

2. Trading Weak When It’s Supposed to Be Strong

3. LCID Still Trying to Find a Range

Let’s get started...


New Highs For THIS Inflationary Stock

Unusual Options Activity AA 122221

Wall Street analysts have been pretty high on AA for most of the year. From Goldman Sachs’ Conviction Buy a month ago to a Jefferies Top Pick two weeks ago, and then Morgan Stanley's Top Pick for 2022 last week where they said:

“AA remains our Top Pick in North America as we expect the company to benefit from a structural shift in the aluminum market, led by China’s decarbonization policies (~5% of the country’s carbon emissions) and the 45Mt capacity cap, causing demand to outpace supply post 2023.”

The stock trades well… as it should during inflationary times.

Take a look.

What Does the AA Stock Chart Say?

AA Chart - Options Activity 122221

With all that fear in the air, AA stock is making new highs today.

All year the stock has done what a good stock is supposed to do – Up, Digest, Up, Digest, Up…

The Bulls are in control with the stock firmly above the 50 and 200dma.

The Bears will need to see some weakness to get back to shorting. You don’t want to short this stock here. If it gets to $56, the Bears will try to lean on it again against the breakout level.

That MACD is parabolic as well. It likely needs a month to turn lower.

Keep an eye on $62.50. That was the high in April 2018.

Options Activity in AA Stock

Unusual Options Activity Scanner AA 122121

There’s some unusual options activity in AA Call options. It appears that someone is rolling up their 10,000 AA January 7th $58 Calls to the AA January 7th $60 Calls. He took back $0.95 on that trade.

He was buying the AA January 7th $53 Calls Thursday through Monday for about $3.00.

Then rolled them up from the $53 Calls to the $58 Calls yesterday. He took in ~$2.65.

Add the $0.95 he took in today and he now has the AA January $60 Calls for a $0.60 credit.

Not bad.

Again, notice how the Calls for sale are in the shaded area while the Calls being bought are in the unshaded area.

With the RR$ of the $58 Calls and the $60 Calls at $64.28 and $65.73, respectively, his Target Stock Price is likely around the $65-66 range.

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Trading Weak When It’s Supposed to Be Strong

Unusual Options Activity PLTR 091521

The main rub with PLTR over the last year is that the government makes up a large part of their revenues. In addition, the Bears believe that Peter Thiel’s ties to Trump will work against PLTR as the Biden administration has its way when the contracts come up for renewal.

In the last earnings call, PLTR started to emphasize the expanding customer base, which is a good thing. As Bears do, they harped on the future of these government contract renewals.

Last Friday, news surfaced that the U.S. Army would option into its second year of its partnership with PLTR for $116.3 million. This would seemingly weaken the Bear’s argument that the Biden administration would pullback from PLTR.

Unfortunately, the stock is still under pressure here.

What Does the PLTR Stock Chart Say?

PLTR Chart - Options Activity 122221

After the January run to the highs, PLTR has found a range between $17 and $28.

A brief attempt at a breakout in September was denied.

After the earnings report in November, the stock is down >30%.

What bothers me here is the lack of a “V” bounce near the bottom of the range.

Remember, at the edges the buyers and the sellers should come in to buy or sell aggressively to support their position.  Look at the May low, the July high, the dogfight in September, and then again near the highs in November.  All look more like a "V" (or inverted "V").

The longer it stays “flat” at the lower edge, the more likely it is to break lower on any weakness in the market. Essentially, this “flat” move in December emboldens the Bears.

A break of $17 and the wheels could come off.

That’s still 10% away, but keep it in mind.

Options Activity in PLTR Stock

Unusual Options Activity Scanner PLTR 122121

There’s a lot of chasing going on in the weekly options. Tomorrow’s expiration is seeing call buying in the $19 and $19.50 Call options.

In addition, more than 12,000 PLTR December 31st $19 Calls have been traded.

Earnings are expected in mid-February.

I suspect the Bears will not release pressure here until those earnings. In their eyes, they are one government cancellation from pushing PLTR over the edge. We’ll see.

If you’re bullish, I’d rather play the PLTR February Call options because the option should maintain its bid.

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LCID Still Trying to Find a Range

Unusual Options Activity LCID 102121

The last time we spoke about LCID the stock was heading full speed ahead.

The idea was that LCID needed to slow down and take a break.

I was not so concerned with $25-30, but I did expect a pullback and then the development of a “flag” formation.

We got the pullback.

Now we need more digesting. Take a look.

What Does the LCID Stock Chart Say?

LCID Chart - Options Activity 122221

This pullback in LCID stock does not create a range just yet.

The support at $35 lines up perfectly with the large volume spike in November. It’s a good sign that the buyers stepped in. Unfortunately, the relatively small move higher is cause for concern.

The Bulls want to see a larger digestion range, which would need a move closer to $47.50 -$50 and then higher levels of support on the way down. This would solidify a healthy flag that could catapult the stock higher.

The Bears are trying to prevent that. They want to smother the buying here, which would give the next move lower extra strength to break $35.

The options market is busy today.

Options Activity in LCID Stock

Unusual Options Activity Scanner LCID 122121

LCID weeklies are in demand with the stock moving higher. Day traders jumped all over the $39, $40 and $41 Calls. Depending on where you bought them, you could have seen 400% returns if you were first in line or 50% losses if you were a few minutes late.

Those 2-day options are not for the faint of heart.

LCID earnings are not expected for a while, maybe the end of March.

The next big news will likely be insight into delivery numbers that will show their progress.

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