Unusual Options Activity in F stock, AMD and DKS

January 20, 2022

Unusual Options Activity Powell 092921

The market went from 3 hikes in 2022.

Starting maybe in June after the tapering ends.

Then 4 hikes, starting in March. 

Then 5 hikes.

Now, maybe double the amount in January.

Hmmm...

What if they are wrong?

Omicron did a number on the economy for 6-8 weeks.

What are those economic numbers going to look like. I can't imagine they will be good.

Will the Fed jump the gun and start raising rapidly in the face of bad economic numbers?

There are a lot of put buyers out there. At Winning Picks Premium, we have had our share.

But is the near-term risk-reward shifting the other way now?

Here are today's Top 3...

UNUSUAL OPTIONS ACTIVITY

1. Big Trade in F Gives Us an Earnings Target

2. Here’s an AMD Earnings Target

3. Can This Sector Maintain Its Momentum?

Let’s get started...


UNUSUAL OPTIONS ACTIVITY F STOCK

Big Trade in F Gives Us an Earnings Target

Unusual Options Activity F 010421

Jefferies downgraded F this morning to Hold from a Buy, but raised its Target Stock Price up $5 to $25.

“Ford is back, with strong earnings and a repaired balance sheet. Shares have also re-rated on recovered earnings that now approach cyclical highs. All that leaves limited scope for positive surprises although the stake in non-core Rivian, expected IPO of Argo AI and the return of dividends provide strong support... We think it is premature to re-rate legacy [original equipment manufacturers] for their EV progress since earnings remain mostly driven by cyclical shortages, returns remain within historical norms and the EV transition is largely a zero-sum-game initially.”

This “zero-sum-game” has been my question for a while.

If Ford used to sell 5 million regular cars and now they sell 5 million EVs, how many cars do they sell now?

Every time I do the calculation I get 5 million cars, but the stocks trade like the answer is 10 million cars.

When stocks are doubling, who cares about simple math, right?

What Does the F Stock Chart Say?

F Chart - Options Activity 012022

F stock caught some serious momentum and more than doubled over the last 4 months, going from $12.50 to $26.00.

It even had time for a nice 2-month flag between $19 and $21.50.

While the stock has retreated about 15% from the highs, the Bulls are still in control. They have support at the $21.50 level, and then at the 50dma.

The Bears will likely press hard if F trades below $21.50, pushing it toward that $19 level.

If F stock gets to $19, then I would expect a range bound trade to be established around $19 for 3-5 months as the 50dma would need to converge closer to the 200dma.

That said, the MACD looks like F has (at least) one more run to the upside left.

Options Activity in F Stock

Unusual Options Activity Scanner F 012022

F options continue to be active in the front weeks.

But there was an interesting trade in March that sheds light on an upside Target Stock Price.

Someone bought a F 1x2 Call Spread in the March 18th expiration. The details follow:

Buy 20,582 March 18th $25 Calls for $0.84
Sell 41,165 March 18th $29 Calls at $0.27
Net Premium Paid = $0.30

The maximum value of this trade is $5.00 with F stock at $30 on expiration, which gives us their Target Stock Price.

The trade makes money between $25.30 and $34.70, although I think this person would be a seller near that $30 level.

Above $34.70, they are short 2,058,200 shares. I suspect they are long stock, so they are covered.


Stop Guessing - Mobile

UNUSUAL OPTIONS ACTIVITY AMD STOCK

Here’s an AMD Earnings Target

Piper Sandler downgrades AMD to neutral from overweight:

“We are downgrading AMD to Neutral from Overweight and decreasing our price target to $130 from $140. Our downgrade is driven by a combination of factors: 1) our concerns about a slowdown in the PC market during 2022, 2) the earnings and growth headwind from closing the Xilinx deal, and 3) the broader market dynamics around high-multiple, high-growth technology stocks… We do not see the company missing estimates over the next two quarters, but ultimately, we do see a combination of slower growth and a slowing PC environment burdening the stock. In our eyes, this represents a high multiple set-up coupled with a slowdown in growth”

Another stock that doubled.

Nothing goes straight up forever without some digestion.

What Does the AMD Stock Chart Say?

AMD Chart - Options Activity 012022

After a big run, AMD stock has been taking a breather over the last 6 weeks.

It has support at the $122.50 level, which was resistance from early-August.

The recent breach of the 50dma and the distance between the 50 and 200dma is a cause for concern.

The stock is making lower highs and lower lows.

Bears are likely covering shorts here but will not hesitate to pounce again near the 50dma at $144 AND below $122.50.

Options Activity in AMD Stock

Unusual Options Activity Scanner AMD 012022

Someone is setting up an AMD Call Spread for earnings due on February 1st.

They bought the AMD February 18th $135 - $145 Call Spread for around $2.60.

This gets them a ~ 3 to 1 payout at $145.

Notice that the upper strike matches the range where we see resistance.

AMD has a seemingly wide range which makes it tradable, however, be careful as I believe that range will narrow quickly over the next several months.


New Options Chain - Mobile

UNUSUAL OPTIONS ACTIVITY DKS STOCK

Can This Sector Maintain Its Momentum?

Unusual Options Activity DKS 012021

Dick’s (DKS) raised 4Q earnings estimates 2 weeks ago. The company has not guided for 2022 yet, but the 2021 numbers are explosive.

Today, Bank of America names DKS as a top pick for 2022 with an attractive valuation.

“New consumer habits established during COVID should continue to support elevated spending trends that benefit well positioned Leisure Brands & Retailers that have: 1) large market share penetration opportunities; 2) accelerating brand momentum; 3) product innovation pipelines; and 4) enhanced digital/omni-channel strategies: We also favor stocks with attractive valuations relative to ROIC.”

I like the space.

Wall Street is having a tough time figuring out if DKS can match 2021 performance.

And that’s the opportunity.

If they can match or exceed those 2021 earnings in 2022, the stock will explode higher as analysts need to catch up with their estimates.

At Winning Picks Premium, we are long a similar name with a lower P/E, higher growth, but less of a following and like DKS no 2022 guidance. I think the next earnings report will give us a good look at 2022 estimates and should be an important catalyst for both names.

What Does the DKS Stock Chart Say?

DKS Chart - Options Activity 012022

The lack of earnings guidance has made DKS stock quite volatile over the last several months.

Is it a “Covid stock” or not?

That’s what everyone is trying to determine.

After a big move, the 50 and 200dma have converged nicely, which makes a big move possible again.

The Bulls are looking for a move above the 50dma and a hold there before making a move toward $140.

The Bears, on the other hand, are likely leaning on it below the 50dma and will force the Bulls to prove that it belongs higher.

Options Activity in DKS Stock

Unusual Options Activity Scanner DKS 012022

There was an interesting trade in DKS Puts today.

Someone sold 10,000 DKS January 21st $112 Puts at $0.31. These expire tomorrow.

The put seller is stating that they would buy 1,000,000 shares at $112.00 ($112,000,000 worth of stock) if it got there or below by tomorrow.

They got paid $310,000 for taking that risk.

The seller of that Put likely sees great value in DKS and is a VERY large buyer of stock outside of these Puts. So, maybe there isn’t that much risk at all.

This $310,000 in premium was just for their time waiting to buy more stock, which makes their hourly rate around $10,000… Not bad.

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Best,
Felix

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