Yesterday, I gave you the 13Fs to go over.
Today, there’s several good charts HERE on how the biggest money managers are positioned.
We can’t go up every day, right?
UNUSUAL OPTIONS ACTIVITY
1. LCID Defies the Odds. Now What?
2. AMZN Dominating … Again!
3. ROKU Breaks Wall Street’s Simple Rule
Let’s get started...
UNUSUAL OPTIONS ACTIVITY LCID STOCK
LCID Defies the Odds. Now What?
LCID stock has doubled in 6 weeks, becoming one of the top automakers in the world. Shorts in the name have been obliterated as the weekly options added fuel to the fire.
Morgan Stanley analyst Adam Jonas thinks the move is “aggressive.”
“Scaling production is historically the riskiest part of a company’s lifecycle. This risk is compounded by unprecedented supply chain disruption outside of LCID’s control… At more than $50/share currently, we estimate the company is discounting volume well above management’s long term targets and an EBITDA margin in the area of 20%.”
He did raise his price target though… to $16.
Ok, the question is now what?
What Does the LCID Stock Chart Say?
LCID stock made a move like this before in the January-March time frame. Notice the large part of that move occurred over a few days, where the stock went from $32 to $60. Also, notice that there was very little volume.
This recent moonshot is different… and likely stronger.
First, there have been 3 separate blasts higher.
And second, each of those moves came with significant volumes reaching more than 150 million to almost 400 million shares. These are multiples of what was seen back in January on the way up.
This means that the likelihood of it going back to $25-30 anytime soon is greatly reduced.
What is more likely to happen is what we have seen with many of these names… a digestion period. Something like the flag I’ve drawn on the chart.
Options Activity in LCID Stock
The LCID option flows are concentrated in the front two weeks. And it’s been fast and furious on both sides of the fence. The biggest volumes occurring in the LCID November 19th $50 Puts and the LCID November 19th $55 and $60 Calls.
Keep in mind, 6 weeks ago LCID options traded with a 60-70% Implied Volatility. This morning, the front-week options reached 190%. Next week’s options jumped above 150%.
Notice the IV Crush that’s happened over a couple of hours along with a retreat in the stock?
The IVs are now 142% and 127%, respectively.
This is how the market makers take back their money that they probably lost on these spikes.
Now, consider what the 1-standard deviation move is for next week’s expiration. The November 26th $51 Straddle is approximately $8.50. Multiply that by 1.25 gets you $10.625. Add/subtract that from $51 gets you $40.375 - $61.625 as the range. The market expects LCID stock to land between that range 68% of the time.
If we get a week of trading within that range, IVs will likely come down and the following week’s range would get tighter. This is how flags are formed.
But can it explode higher?
Of course, but the odds now favor a digestion period and selling premium against your long stock if you have some is worth consideration.
UNUSUAL OPTIONS ACTIVITY V STOCK
AMZN Dominating … Again!
It’s not a good morning when you wake up to see AMZN knocking down your door.
The company is a beast. What they want … they get.
Today, AMZN said that shoppers in the UK won’t be able to use their Visa credit cards in January. The reason cited was that the fees were too high.
Lower fees equal lower revenues, equal lower earnings. Yikes!
“Yes, but that’s just the U.K., Felix!”
Right, and if it works there, they will “test” it everywhere.
Of course, it could also just be a ploy in negotiations, however, this shows the world how vulnerable V and MA and PYPL might be.
Consider that AMZN and Shopify (SHOP) together are responsible for 32% of U.S. Commerce. This high concentration combined with increasing options for consumer payments can easily shift the power away from Visa.
What Does the V Stock Chart Say?
V stock has a lot of history around the $210-215 range going back a couple of years. Today is a definitive breakdown on good volume.
The stock remains under the 50 and 200dma.
There is an ABCD pattern developing over the last month aiming right at $192.50, which coincides with the February low.
The Bulls need good news on the negotiation front there.
Unfortunately, the Bears will be quick to remind everyone that the fintechs will disrupt these giants and reduce fees across the industry. (Of course, they will also short those fintechs because of reduced fees across the industry. Lol)
Options Activity in V Stock
After V earnings, we didn’t get the expected IV Crush.
Implied Volatilities are up as the options flow is better to buy and mixed evenly on both sides. You can see the buyers taking the V November 19th $205 and $207.50 Calls looking for a bounce.
On the flip side, there is heavy action on the V November 19th $202.50 and $200 Puts. Notice the Risk-Reward Breakeven Price on the $200 Puts is $196.68.
I suspect upside Calls to come in for sale as the range for this stock seems to have narrowed between the $192.50 and $212.50 range for the near-term.
This story made me want to look at another name that was hot recently… AFRM.
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UNUSUAL OPTIONS ACTIVITY ROKU STOCK
ROKU Breaks Wall Street’s Simple Rule
ROKU is the latest high-flyer under pressure after earnings. The stock is down 12% after a disappointing report.
MoffettNathanson’s analyst downgraded ROKU saying:
“Simply put, we think our and the Street’s long-term revenue and earnings estimates are just too damn high… It appears that Roku will need to monetize an absurdly high portion of long-tail AVOD [ad-based video-on-demand] impressions to come even close to Street numbers, which we think will be a challenge given rising competitive pressures in TV OEMs [original equipment manufacturers] and operating systems.”
It's all part of the “streaming” slowdown we’ve been seeing of late.
The chart is having some trouble.
What Does the ROKU Stock Chart Say?
$271 was trying to hold this week, you can see that was the previous low in May.
On today’s open below that, the sellers came out in force. Notice the volume today.
It could be a slippery slope from here as there is little volume between $160 and $271.
On the flip side, we have 11 months of action above these levels where holders are trapped.
The bears have taking firm control of ROKU stock. They will lean against $271 if it tries to bounce and look to push it towards $200 in the coming months.
The 50 and 200dma turning lower are also at their backs.
Frankly, the bulls need a prayer here. Not only a good market, but some very positive news from the company.
Options Activity in ROKU Stock
After this drop through a big technical level, there is a lot of risk-reward adjusting going on likely involving buying calls and selling stock or buying puts to help protect a position.
That’s why you aren’t seeing the IV Crush after earnings. ( What is IV Crush? )
In addition, early ROKU Call buyers that bought the dip got eviscerated on the open. Some of the upside calls are now coming under pressure. Notice the “3M Sentiment” blue indicator is leaning toward the “Bear” side.
Remember, these types of growth stocks are priced to perfection with sky-high P/S multiples.
The market rules for growth stocks are simple: “If you can’t show continuously strong revenue growth quarter after quarter, you will get punished. In the meantime, Play On!”
Sometimes the market is nice and gives them a pass. But rarely do these companies get passes two quarters in a row.
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