Please don’t forget there is a SPY $1.50 dividend tomorrow. So, if you own SPY deep-ITM-Calls, then be careful holding them overnight.
If they are supposed to be an exercise and you don’t exercise or sell them, then you will lose money.
UNUSUAL OPTIONS ACTIVITY
1. Good News for THIS Stock Calms Investor Fears
2. Could that be the bottom in T?
3. If You Like Copper, Consider THIS Stock
Let’s get started...
UNUSUAL OPTIONS ACTIVITY ABBV STOCK
Good News for THIS Stock Calms Investor Fears
Yesterday, AbbVie announced that the U.S. Food and Drug Administration (FDA) has approved RINVOQ for the treatment of adults with active psoriatic arthritis who have had inadequate responses to certain blockers.
ABBV vice chairman and president, Michael Severino, M.D., said:
"The efficacy of RINVOQ in relieving the many manifestations of psoriatic arthritis is well-characterized in two large, long term clinical studies. This new approval underscores our mission to deliver a portfolio of therapies that can help more people with rheumatic diseases achieve disease control."
This is a big deal for ABBV as they will lose patent protection on their blockbuster drug Humira as early as 2023. The stock was very cheap due to this uncertainty.
What Does the ABBV Stock Chart Say?
ABBV is getting re-rated due to the positive news that has longer-term ramifications, which is catapulting the stock higher.
$120 is now a clear level of support. I am not sure it gets there for a while.
Volume is steady on this move. The real issue is that ABBV had a scare in September that took out a lot of the long holders (Just look at that volume!). The market has run them over here and usually doesn’t like to give them a re-entry.
Just using some symmetry on the chart, I think $136 is possible as the whole sector is well-bid here.
But the most likely scenario is that it finds a range and digests this move for a few months. The question is what’s that range?
Options Activity in ABBV Stock
The unusual options activity in ABBV continues. In general, there is a buyer of the ABBV February 18th $130 - $140 Call Spread. Today, that buyer is selling his 7,000 February 18th $130 Calls and buying 9,000 $135 Calls.
Earnings are due on the first week of February.
Look at those RR$ numbers - $142.50 to $149.68. This implies a move toward $152ish!!!
What do you think?
UNUSUAL OPTIONS ACTIVITY T STOCK
Could that be the bottom in T?
T stock was having a good year until May 17th when they decided to reverse course on their $85 Billion Time Warner acquisition. The stock has been for sale ever since. The only good news is that the dividend yield was approaching 10%, which is attractive if they could pay it.
Today, Morgan Stanley upgraded T to Overweight with a $28 price target saying:
“We believe that recent stock price underperformance has created an attractive risk reward opportunity, while we see a number of catalysts to unlock value by mid-2022… Deal approval (WarnerMedia/Discovery) and closing should occur during 2Q22 although regulatory delays are certainly possible even though the companies are encouraged by progress to date. We believe AT&T’s core Communications business is undervalued and should rerate as we get more clarity on the WarnerMedia/Discovery transaction.”
The stock is getting a boost on this call.
What Does the T Stock Chart Say?
This is obviously a stock under a lot of pressure.
The Time Warner deal was supposed to be a transformational deal for T. T paid a huge price to make it happen and flushed billions of dollars down the toilet.
Investors have voted with their shares.
But there’s always a price where new investors (or old) comeback into a name because it gets too cheap. This might be one of those cases.
T stock is still firmly under the 50 and 200dma. Even with this move in the stock today, it’s still pressing up against that downward trendline.
With the technical damage that’s been done in the name over the last 3 months, I suspect it takes some time for T stock to get back towards that $26.50 level.
The options activity is clearly divided between the day traders and the institutions.
Options Activity in T Stock
There’s high options volume in the weekly expirations. Over 225,000 options have traded up until the end of the year. In these expirations, it’s been mainly Call buyers trying to catch a big move.
Notice the Implied Volatilities moving higher in the closer expirations, while they are down in the later expirations. Increases in IV equal higher demand while decrease indicate more supply.
This would make sense as the further out expirations are seeing upside Call selling.
With T having such a large dividend and a technically challenged stock that should take some time to get back to $26, institutions are likely buying stock and selling Calls against it for the added yield.
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UNUSUAL OPTIONS ACTIVITY TECK STOCK
If You Like Copper, Consider THIS Stock
Copper is at the heart of the Clean Energy trend. You can clearly see the demand come into the commodity over the last year.
Besides an overall commodity bid today, copper seems to be getting a boost from reports that one of Peru’s largest copper mines will shut down this weekend.
TECK stock was pitched in the spring by David Einhorn at the Sohn Investment Conference in May.
What Does the TECK Stock Chart Say?
TECK is trading well. It moves up, pulls back, then moves up again.
It’s firmly above the 200dma and the stock is trying to recoup the 50dma today.
Obviously, copper needs to hold the $4.00 level for TECK not to fall apart.
The MACD has released a lot of the upside on sideways action in TECK over the last 2 months, which could get TECK moving higher through those highs with Copper.
The Bears will tell you that copper may be stuck if the Fed is going to raise rates 4-6 times in the next 18 months.
That said, an institutional buyer is thinking new highs.
Options Activity in TECK Stock
There’s unusual options activity in TECK February Call options. Someone traded 10,000 TECK February 18th $29 -$31 Call Spreads for $0.64. Given the open interest vs volume on the $31 Calls it appears that the person was rolling down his position.
Investigating it a bit further, the TECK February 18th $31 Calls were bought 10,000x on September 10th for $1.30.
It should be interesting to see that the buyer is rolling down into the unshaded area and selling his call options in the shaded area. Recall, the Top 1% want to find opportunity in the unshaded area. As time goes by and the risk-reward of the option moves away from him, he decides to roll down.
The RR$ on the $29 and $31 Calls are $33.29 and $34.99, respectively. This call Spread indicates a target stock price near $34-$35.
I am sure he is not using the New Options Chain, just rest assured its built to mimic their process in picking and adjusting strike prices.
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