Unusual Options Activity in TEVA stock, MSFT and GOLD

December 14, 2021

Unusual Options Activity UAE missiles 121421

This is an interesting read.

If one country is pushing back, how many others are wondering the same?


1. What’s Wrong With Gold?

2. Another MSFT Trade Idea to Watch

3. Cheap Stock Relying on a Legal Decision

Find your own ideas with the Unusual Options Activity Scanner

Let’s get started...


What’s Wrong With Gold?

Unusual Options Activity GOLD 111021

The bullish case for gold is “Inflation.” Gold has been a store of value for thousands of years.

The bearish case for gold is “Inflation.” Inflation is already here and gold doesn’t want to move higher. The bears would tell you that this means the next move is lower.

Oh yeah, the shiny metal is also sitting at the table with the another inflation hedge … Bitcoin. Bitcoin has been the clear choice for retail investors and even institutions this year.

GOLD stock, a gold miner, can’t seem to get up.

What Does the GOLD Stock Chart Say?

GOLD Chart - Options Activity 121421

The $17.50 level in GOLD seems to be providing some support... barely.

The stock is firmly under the 50 and 200dma here with a 17-month downtrend overshadowing the stock.

The bears will happily lean on GOLD stock from $19 to $20.

Bulls probably come back into the stock above $21.

Since we are at the lows of the year, there is likely tax-loss selling in the name pressuring the stock.

The options seem to be telling a similar story.

Options Activity in GOLD Stock

Unusual Options Activity Scanner GOLD 121421

GOLD option flows in the further out expirations are seeing exits in good size. Given the greater open interest vs volume, it appears that there is a seller of 12,000 June 17th $22 Calls.

In addition, there appears to be 15,000 Calls sold to close in the January 20th (2023) $18, $20, and $25 Calls.

I tend to be a believer in gold. It has 8,000 years of history maintaining its value.

But maybe it really is different this time. Thoughts?

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 Another MSFT Trade Idea to Watch

I gave you a trade in MSFT several weeks ago. With the stock trading $343 I asked you to consider the following:

Buy 1 MSFT January 21st $340 P
Sell 2 MSFT January 21st $320 P
Net-Net = You pay $1.

The risk to the trade is that you must feel comfortable owning the stock at $301. You make money between $301 and $339 at expiration. The most profit is had at $320.

Below $301, you lose $1 for $1 on 100 shares.

Today, MSFT is down at $325. The spread is only at $1.15, however, with every passing day, the spread should start expanding.

I think you would learn something if you watched how this price moves over the coming weeks.   

What Does the MSFT Stock Chart Say?

MSFT Chart - Options Activity 121421

MSFT stock looks stuck in this $305-$350 range until earnings in late-January. The stock is down 4% today putting it directly in the middle of that range.

The bulls would like to see MSFT hold the 50dma at $325. A break there could cause some selling towards the $305 breakout point. That would be a ~7% drop in MSFT, which would likely attract a lot of big institutional money.

It would also mean that the market would be under some decent pressure.

On the flip side, the stock has done some short-term damage over the last 3 weeks, so I don’t expect the $350 highs to be taken out so easily.

Options Activity in MSFT Stock

Unusual Options Activity Scanner MSFT 121421

The MSFT options weeklies are active. Near the open, the MSFT December 17th $335 Calls and the $330 Puts were sold.

After the stock sold off, traders positioned themselves into the MSFT December 17th $325 Puts and the $330 Calls.

If you own MSFT and want to play the upside with a cheap bet into year-end, this is interesting:

Buy 1 MSFT December 31st $330 Calls
Sell 2 MSFT December 31st $340 Calls
Net Price = $1.00

This trade makes money between $331 and $349. Above $349, you give up exposure to the stock. Maximum value is $10 on this trade at $340 on expiration.

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Cheap Stock Relying on a Legal Decision

Unusual Options Activity TEVA 121421

While TEVA is a cheap stock, it may be surprising to hear that Warren Buffett is long the name. I wouldn’t picture him getting involved in a stock involved in such a big mess.

TEVA is one of many companies being sued in the fallout of the opioid epidemic. CEO Kare Schultz is still hoping for a settlement by next year. In October, he said:

“I think the nationwide settlement is what makes the most sense, because it’s a simpler and faster way for everybody to resolve the issue. It’s, of course, taking a long time, as we both know. Part of the reason, of course, is that there’s a lot of involved parties.”

Last month, TEVA got their first industry win in California. Maybe this momentum gives them a little leverage to push for that settlement?

What Does the TEVA Stock Chart Say?

TEVA Chart - Options Activity 121421

After a strong start to the year, TEVA stock has given it all back and then some.

The stock recently broke that $8.50 level, which was strong support throughout 2021.

It’s under the 50 and 200dma, with both averages trending lower.

The warning here is that technical analysis may not matter much due to the legal battle in the background.

The situation is somewhat binary. A “win” for TEVA in court shoots the stock higher and allows the market to focus on the fundamentals again. But a big loss might put the stock under a lot of pressure.

That said, the options market has been heating up a bit lately.

Options Activity in TEVA Stock

Unusual Options Activity Scanner TEVA 121421

There’s been unusual options activity in TEVA over the last week. Today, someone stepped in to buy 12,000 of the TEVA June 17th $10-14 Call Spreads for $0.47.

Perhaps they are selling the stock?

I’ve always liked call spreads in this name rather than stock. They reduce risk here and offer better value.

TEVA stock traded $13.25 earlier this year, so a settlement can get this back above +$13.

At $0.47, the spread offers 7.5 to 1 at $14 on expiration. This equates to an 11.7% probability, which makes it look interesting.

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Now go make some money!



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