China is my biggest worry for several reasons:
1. Supply Chain problems get much worse.
2. Real Estate slowdown effects on rest of the world.
3. Currency devaluation?
4. Taiwan & Geopolitical issues.
My immediate concern is #1 and I suspect media attention will grow in the coming weeks. Here's Bloomberg's take on the matter.
Here are Today's TOP3...
UNUSUAL OPTIONS ACTIVITY
1. Incredible Dividend Yielding Stock… Will it Last?
2. What to Expect With JPM Earnings
3. Breakout coming for THIS Re-Opening Stock?
Let’s get started...
UNUSUAL OPTIONS ACTIVITY VALE STOCK
Incredible Dividend Yielding Stock… Will it Last?
Brazilian mining company, VALE, is the largest producer of Iron Ore in the world.
Right now, that’s a good thing. The company has a variable dividend policy that yields a whopping 17.6%... IF iron ore prices stay bid.
They’ve reduced net debt levels and have a good amount of cash, which means positive metal prices should add to these shareholder returns.
But Brazil has been and will continue to be a wild card.
What Does the VALE Stock Chart Say?
VALE stock took a steep drop in the latter half of 2021.
It’s trying to climb back. The 50% Fibonacci retracement level is around $16. This also happens to be close to the 200dma.
The Bulls are pointing to control of the “turning” 50dma and a constructive MACD. They are also encouraged by the inflows of capital into the commodities sector to start 2022.
The Bears are ultimately pointing to the macro environment and the potential for much lower steel demand numbers coming from pressure on China’s real estate industry.
I think the stock may need to find some ground before moving higher. I suspect that the moving averages need some time to get back on the same page i.e. tighten the distance between the two.
Options Activity in VALE Stock
There was a significant Options roll done in VALE this morning.
On November 23rd, someone bought 26,000 January 21st $14 -$17 Call Spreads for $0.35. In addition, it appears that on December 13th someone hedged VALE with the following:
Sell 30,000 January $15 Calls to
Buy 30,000 January $12-13 Put Spread
Today, they closed out their January options and rolled into February by doing the following:
Sell to Close 26,000 January 21st $14 - $17 Call Spreads 26k
Buy to Close January 15 C 30k
And rolling into…
Buy 26,000 February 18th $16-$18 Call Spreads for $0.41.
I suspect this person owns a lot of stock as well.
UNUSUAL OPTIONS ACTIVITY JPM STOCK
What to Expect With JPM Earnings
With JPM releasing earnings tomorrow, investors will likely focus on 4 things:
- Loan Growth
- Interest Income
- Trading Profits vs Investment Banking vs Wealth Management mix
- Credit Quality
As maybe the most important bank in the world, what we learn here can move other sectors like Fintech, especially Credit Quality.
If there is a whiff of bad Credit lurking in the future, you may see some of the fintech stocks weaker on the report. On the contrary, I think the higher credit score customers will be fine. Why do I think that?
JPM CEO Jamie Dimon keeps assuring us that the economy and the consumer is strong. I’ll take his word at fair value until the numbers say different.
What Does the JPM Stock Chart Say?
After trading up to sideways for most of last year, JPM stock seems to be itching for a breakout higher.
It has established a $28 range between $144 and $172.
The stock is firmly above the 50 and 200dma.
A break higher on great volume will draw more momentum into the stock with the rest of the big banks reporting within days.
That said, with most people leaning long the banks here, a bad report could be troubling. Support will likely be found at the moving averages, $162 and $158.
Options Activity in JPM Stock
Out of the gate this morning the buyers came for the JPM January 14th $170 Calls and the JPM January 21st $170 Calls
The options market is pricing the range after earnings to be approximately plus/minus $5.00 (68% of the time). This gets you near $164.50 to $174.50.
You can see that the RR$ for the $170 Calls is $173.65, so $174.50 matches up well.
Given the chart, a move into the low $160s should be an interesting place to get long financials. I am not sure it gets there though.
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UNUSUAL OPTIONS ACTIVITY EXPE STOCK
Breakout coming for THIS Re-Opening Stock?
There are several smart New York hedge funds in this name with stock and options.
EXPE is clearly a re-opening trade.
They have good operating leverage if we get back to normal.
The main question is… when will that happen?
What Does the EXPE Stock Chart Say?
EXPE stock has had a wide range, $137-$192 over the last year.
The March high price at $187 seems to be the level it needs to get through and hold for a breakout. As you can see it has had trouble at this range before.
But notice the 50 and 200dma today vs the past. They have tightened up dramatically and after doing their dance the 50dma is trying to turn higher.
The Bulls are looking for a breakout here and momentum to come back into the name. This ~$50 would add $50 upside, which gets us closer to $238.
The Bears are going to lean on this level until volume shows up and takes it through. But given that chart, I suspect EXPE is not on the top of any short list.
Options Activity in EXPE Stock
A buyer stepped in to grab the EXPE June 17th $190 Calls for ~$21.00. Comparing the options volume vs open interest shows that this was an Opening Buy. In addition, Implied Volatility is also up and these traded on the offer.
Notice, the RR$ is $239.04. The Buyer of options has to be thinking higher than that!
What do you think, can it get there?
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