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Unusual Whales Trading Strategy

Filters used: https://unusualwhales.com/watchlist/8a71e227-7cee-493a-a729-639a80c1ab7b

Step 1: Create a scan filter for option contracts that you want.

The scan filter that I created looks for options that meet the following criteria:

      1. Have a premium under $1 or worth less than $100.
      2. Expires within the week.
      3. Traders are buying the contracts at the ask price.
      4. Avoiding companies that are reporting earnings soon.
      5. Not a hedge trade.

Reasoning:

I applied these filters looking to find option contracts in high demand because someone believes a big move will come soon.

I also have a budget of under $100 per contract.

 

Step 2: Review the alert’s technical details.

For this walkthrough, we will be going over the $AMD 2021-08-06 call $115.

 

The trade was alerted on August 2nd at 3:55 pm, minutes before the market closed.

The bid and ask were around 0.67 and 0.69,  well within our $100 budget.

When the alert was given, $AMD was trading around $109.12.

The delta of the contract was 0.1951m which is an excellent delta for this contract.

We also note the 35,450 volume – meaning there is a relatively large interest/liquidity in this contract.

 

Step 3: Do your technical analysis on the underlying stock to qualify or unqualify the alert.

On the 2hour time frame, we can note that the 14-day simple moving average ( dashed blue line) is well above the 30-day simple moving average ( dashed yellow line).

We can also take note that AMD has recently reported earnings. The stock sold off into the 30-day simple moving average ($89.5) and then bounced up towards $95.24, then $99.74, then $102.52, $105.3, $107.02, $109.81.

So far, the stock seems to have impressive positive momentum and continues to push into new highs.

The potential downside: the stock is over-extended since it went from $89.5 to $109.81 without stopping. Could potentially see a near-term reversal. It could possibly come down towards $107.02

 

On the 1 day timeframe, we pretty much the same analysis that we saw on the 2hour time frame.

Our intraday and daily time frames indicate that the stock has very positive momentum and is likely to push higher into new highs.

This leading to my conclusion: the alert to buy the $AMD $115 calls offers a good risk-reward.

Step 4: Placing your trade.

Now that we know what contract we’re going to trade, we have to execute the trade.

Given that the trade was alerted at 3:55 pm, just 5 minutes before market close, I had to wait until the next day actually to place the trade.

Once the market opened, $AMD opened around $108 and then pushed higher into $109.81, but it could not hold above it.

Price continued to fluctuate between these two levels until around 11 am.

Around 11 am, $AMC pushed above the $109.81 resistance that we took note of previously.

This was my ideal entry point.

Around this time, the $115 contracts were trading at $0.54 or $54, perfectly within our budget and at a lower price than initially alerted.

$AMD then pushed higher into $112.59 – a good price target to reduce some risk. A good idea to sell around 50% of your position.

After this, we continued to push higher into $114.85, pretty close to the $115 strike. A great idea to sell the remaining position here.

The option contracts went from $0.54 to a high of $2.6.

An insane 381% return on investment.

Step 5: Stop trading.

It is best to walk away while you’re up than to give back your profits.

 

 

Second trade : AMD $112puts

On Wednesday, August 4th, at 3:49 pm, the filter alerted AMD $112puts

 

We dive into Step 2: Review the alert’s technical details.

The bid and ask were around 0.69 and 0.72,  well within our $100 budget.

A delta of -0.1722, an excellent delta for this trade.

Delta represents how much your option contract will increase/decrease per $1 move in the stock price.

In this situation, if AMD goes down $1, your option contract will increase by .17 or $17.

If we bought the contract at $70 and the price increases by $17, we just earned a 24% return on investment.

Step 3: Do your technical analysis on the underlying stock to qualify or unqualify the alert.

We opened up our 1hour time frame and noticed that an Asymmetric Triangle was being formed.

This setup is good for bullish and bearish trades.

Typically if we want to buy puts when the price is on the upper resistance trend line and calls when we are on the lower support trend line.

We would also buy puts if we fall below the lower support trendline and calls if we get above the upper resistance trendline.

I went on the 2hour time frame and took note of the levels that mattered to me.

Below $117.87 will be below the bottom support line, confirming weakness in the stock. Meaning more downside action to come. The target price would be $114.31 or $112.59

Above $120.3 will be above the upper resistance line, confirming strength in the stock.

 

Step 4: Placing your trade.

Now that we know what contract we’re going to trade and what price levels we are looking for, we now have to execute the trade.

Given that the trade was alerted at 3:51 pm, just 9 minutes before market close, I had to wait until the next day actually to place the trade.

At 9:32 on August 5th, AMD opened around $116.16, well below our $117.87 level. The stock was showing a great deal of weakness.

The $112puts were trading around $1.02 – this was out of my $100 budget.

I decided to wait and see if these contracts would come back down in value before getting into the trade.

Around 10:05 am AMD was trading around $115.82 and the $112 puts were now trading around .74.

I saw the stock was consolidating between $115.75 and 116.14.

I went ahead and bought the $112puts here with a stop loss at $116.2.

With having cleared defined target price and stop-loss, we were able to take this trade from .74 to 2.17, a 192% return on investment.

Step 5: Stop trading.

It is best to walk away while you’re up than to give back your profits.

 

For more information on how to use the 14-day and 30-day simple moving average:

https://www.youtube.com/watch?v=ikOSIJ4lOXk

 

For more information on how Option contracts change in value :

http://trading.tigerwolfcapital.com/resources

 

If you are interested in being part of Discord chat:

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Tiger Wolf Capital : Stocks to trade this week

$BA Boeing

News: Southwest Airlines on Monday said it is buying 100 new Boeing  737 MAX jets.

This is big news for Boeing, which lost hundreds of orders during a prolonged grounding of the troubled jet and reduced demand for travel during the coronavirus pandemic.

The order for the MAX 7 jets, the smallest MAX variant, means Boeing will retain its lock on one of its most important airline customers. Southwest’s fleet is made up entirely of 737 jets, but the carrier had been re-evaluating that strategy.

Technical Analysis: On Monday: $BA closed @ $250.52, +2.31% from Friday’s close.

In my personal opinion, I do not think this news is big enough to make the stock continue going up.

I think this was a 1-time push and we should anticipate more downside to come.

I do believe $BA will trade lower into $242.69 and maybe even 233.78

I like the $230puts for 4/9 – currently trading @ 1.90

 

 

PENN Penn National Gaming Inc.

News:  Deutsche Bank Gaming report warns about NY government being more pessimistic about passing new gaming laws.

Now I personally do not agree with the report, but I do see the stock continue to sell-off.

After recently joining the S&P500 ETF, SPY, investors are not interested in owning the individual company when they can just bet on the overall market doing well.

On Monday, PENN closed at $98.21, down 7.85% from Friday’s closing price.

I do see the stock heading lower into $86.17

I do like the $90 puts for 4/9, currently trading at 2.41

Join our discord for more trade ideas like this: https://www.tigerwolfcapital.com/discord/

Tesla increases Model Y price in China after successful launch in the market

Tesla has increased the price of the Model Y electric SUV in China last night after a successful launch in the market.

In January, Tesla launched the Model Y in China.

The launch of the electric SUV was highly-anticipated since the electric crossover/small SUV segment is very popular in the market, and since Tesla was waiting on producing the vehicle at Gigafactory Shanghai before launching it in the country, the market was curious about the price point Tesla could hit.

The automaker ended up launching the Model Y at a lower than expected price of 339,900 yuan ($52,000) for the Long Range Dual Motor version, and the Model Y Performance version started at 369,900 yuan ($56,600).

It was a successful launch as the automaker delivered just over 1,600 Model Y electric SUVs in China in January and quickly ramped up to 4,630 Model Y deliveries in February.

As we previously reported, Tesla sold out the first quarter of planned production in just a few days, and Model Y is believed to already be putting pressure on competitors NIO and Xpeng.

Now, Tesla has decided to increase the price of both Model Y versions in China overnight:

 

Tesla Model Y, China

The price has increased by 8,000 CNY, which is the equivalent of about $1,200 USD.

As usual, Tesla didn’t disclose the reason behind the price changes, but the automaker also made several price changes in the US and other markets in recent months.

Tesla’s Model Y production ramp-up at Gigafactory Shanghai is being followed closely by the market as it is expected to be the biggest contributor to the automaker’s growth in 2021.

The company has hinted at producing as many as 200,000 Model Y vehicles at the factory this year.

Gigafactory Shanghai could produce up to 450,000 vehicles in 2021.

The factory has already been a great success for the automaker, and now, it is trying to recreate that success at Gigafactory Berlin and Gigafactory Texas, which are currently both under construction and where Tesla plans to also produce the Model Y.

Disagreement about U.S. and Euro-Area Inflation Forecasts

FRBSF Economic Letter

2021-08 | March 22, 2021 | Research from the Federal Reserve Bank of San Francisco

Disagreement among economic forecasters about the outlook for inflation in both the United States and the euro area has increased since the onset of the pandemic. The nature of these forecast differences can provide insights into the inflation risks that lie ahead. Many forecasters initially expected substantially lower inflation over the next year but subsequently raised their expectations as economic activity began to improve. In contrast, changes in expectations and disagreement about longer-term inflation have been relatively subdued and suggest a balanced likelihood between higher and lower inflation.

Read More

The Fed, the source of market volatility or an ally ?

The Fed could be a source of market volatility as Powell and others speak in the week ahead.

 

  • Fed Chairman Jerome Powell testifies before Congress twice this week, and a dozen other Fed speeches are slated for next week.
  • Personal consumption expenditures inflation data will be released at the end of the week.
  • It’s important as the market is focused on inflation and contending with the Fed’s willingness to let it run.
  • The direction of bond yields could continue to drive stocks after the 10-year reached a high of 1.75% this past week, its highest in 14 months.

See the source image

The Federal Reserve could remain a source of angst for markets in the week ahead, with chairman Jerome Powell scheduled to testify twice before Congress and more than a dozen other Fed speeches expected.

The bond market’s reaction to the central bank this past week was pretty volatile, as we would expect.

Though the market was initially steady after the two-day Fed meeting and Powell’s briefing Wednesday, Thursday came with a big selloff in bonds and spiking rates. Traders reacted to the fact that the central bank is willing to let inflation and the economy run hot while the job market recovers.

In the approaching week, bond market professionals will be watching Powell and other Fed members for further cues for what will come in the upcoming weeks.

“This is bonds’ — I wouldn’t call it a day in the sun — it’s more like a day in the tornado,” said Michael Schumacher, head of rate strategy at Wells Fargo. “Clearly, the bond market is the one the equity market is watching right now, and normally that’s not the case.”

Stocks were lower on the week, with the Dow off about 0.5% and the S&P 500 down 0.7%. The Nasdaq Composite was off 0.8% for the week.

 

Powell speaks

Powell testifies Tuesday and Wednesday before Congressional committees and Treasury Secretary Janet Yellen on Covid relief efforts and the economy.

He also speaks on central bank innovation at a Bank for International Settlements event Monday morning.

This week, other central bank speakers include Fed Vice Chairman Richard Clarida, Vice Chairman Randal Quarles, Fed Governor Lael Brainard, and New York Fed President John Williams.

Inflation and the Fed

There are also some key data.

Important releases include the personal consumption and expenditure data on Friday, including the PCE deflator, the Fed’s preferred inflation measure. Core PCE inflation was running at an annual pace of 1.5% in January.

The Federal Reserve this past week took no action at its two-day meeting, but it did present new economic projections, including a forecast of 6.5% for the gross domestic

product this year. The central bank’s forecast now shows PCE inflation going to 2.4% this year but falling to 2% next year.

The majority of Fed officials did not see any interest rate hikes through 2023.

Powell reiterated that the Fed sees just a temporary pickup in inflation this year because of the base effects against last year’s numbers when prices fell.

The central bank will target an average range of inflation around 2% so that that number could exceed that threshold for some time. It’s a change to the Fed’s ground rules, which makes the bond market nervous.

Normally, the Fed would hike interest rates if inflation flared up to avoid an overheating economy and avert a bust cycle.

“For the bond market and the Fed, there is a communications problem, and there’s a consensus problem. There can’t be tension,” said Diane Swonk, chief economist at Grant Thornton.

“They will be trying to clarify the Fed’s message, but without a consensus on what those numbers and guardrails mean, it will be hard,” she said. “They will be explaining themselves as economists, and they’ll be speaking a different language than the bond market speaks.”

Leo Grohowski, chief investment officer at BNY Mellon Wealth Management, expects the bond market could be more volatile than stocks, and inflation would be problematic for both.

At some point, he expects there could be a 10% stock market correction, and inflation or a sharp move in bond yields could be a trigger.

“The market is trying to make sense of what could be perceived as a disconnect between their economic projections and the Fed’s dual mandate of unemployment and inflation,” said Grohowski.

“Yet, they’re committed to keeping short rates on hold until the end of 2023,” he said. “That’s what the market is struggling with. I think it’s unsettling to me to hear words like ‘overshoot.’”

Rotation from tech into cyclical

Growth and tech have been most sensitive to rising rates, and the Nasdaq has corrected more than 10%.

 

Grohowski is concerned by the Fed’s willingness to let inflation overshoot because inflation is a negative for stocks.

Supply chain issues are a concern. He pointed to Nike’s comments Thursday that its sales were hurt by port congestion and the shortage of semiconductors, impacting automobile production.

“Inflation expectations are troublesome for P/E [price-earnings] ratios,” Grohowski said. The [stock] market is trading at 22 times our estimate for this year’s earnings.”

He said the market is having difficulty reconciling the lack of any forecasted interest rate hikes versus the Fed’s economic forecast strength.

 

“If you ask me what I lose sleepover? …It’s too much of a good thing. Too much of a good thing is being too accommodative,” Grohowski said.

Market Sell-Off Part 2: Zoom Earnings and 10 Year Treasury

THE SECRET SAUCE | COMPLEX IDEAS | SIMPLE SOLUTION

Market Sell-Off Part 2:  Zoom Earnings and 10 Year Treasury

Friday, March (3/5) Closing Price

 

Discord Logo And the History of the Business | LogoMyWay
DISCORD RECAP (March 1st – March 5th)

We like energy and oil.

After OPEC’s surprise to cut oil production through April,  we anticipate oil prices will continue to climb.

Crude oil has been a top-performing asset this year, with variants like gasoline and diesel also delivering significant gains in 2021 of 38.6% and 24.3%, respectively.

To participate in this, we will be investing in Exxon Mobil, $XOM.

On Friday, XOM closed at $60.93 and we see a potential to hit $85.

If you trade this stock, we have a short-term target price of $63.17.

Day trading short-term call options could also be a good idea.

Zoom Logo - PNG and Vector - Logo Download

Fundamental Analysis Matters???

Investors have decided that fundamental analysis is essential this week, reflecting in Zoom’s stock price dropping $100 or 30% in two days.

Zoom released its earnings on Monday, and they blew expectations out of the water. The video-calling software maker reported its revenue grew 369% YoY in the quarter that ended on January 31st, after growing 367% in the

third quarter and losing fewer customers than executives had expected.

  • Revenues soared to $883 million, up from $188 million the year before.
  • Based on formal accounting rules, Zoom’s net income rose from $15 million to $260 million, or 87 cents a share.
  • The gross margin expanded from the previous quarter’s 66.7% to 69.7%.
  • small customers grew to 467,100 customers with more than 10 employees at the end of the fiscal fourth quarter, nearly five times as many as it had before the pandemic hit, or up 470% on an annualized basis, compared with 354% growth in the previous quarter.
  • It ended the quarter with $4.24 billion in cash, cash equivalents, and marketable securities, significantly up from the previous quarter’s $1.87 billion.
  • Consensus estimates for their Earnings per Share (EPS) was $0.79, and actual was $1.22 for Q4.
  • Zoom’s revenue topped $822B, almost 9% better than estimates, and provided 2022 earnings guidance of $3.62 per share.

Despite these robust estimates, investors do not agree that the stock should be trading at 110x its 2022 Earnings estimates as well investors are wary of whether or not Zoom can continue this momentum.

Just two weeks ago, researchers from Stanford University argued about possible “Zoom fatigue.”

The study found that all the countless hours spent on zoom calls take more of a tool on the human brain and body than regular office work.

The fact that we are always connected, and sharing is leaving us mentally fatigued. The address four key reasons.

  1. Excessive amounts of close-up eye contact are highly intense.

  2. Seeing yourself during video chats constantly in real-time is fatiguing.

  3. Video chats dramatically reduce our usual mobility.

  4. The cognitive load is much higher in video chats.

We wouldn’t be surprised if we started to see a decline in zoom video usage in the upcoming months with vaccine rollouts, re-openings, and taking a break.

Target Reports Record-breaking Earnings, stock sells off.

Target-Logo - Earl & Brown

best friends yes GIF by Target

Target’s stock closed down 6.8% on Tuesday trading but has soared 64% over the past year.

For the fiscal fourth-quarter ending on January 30th,

  • revenue rose 21% to $28.34 billion from $23.4 billion last year, higher than analysts’ expectations of $27.48 billion.
  • Comparable sales, a critical metric that tracks sales at stores open at least 13 months and online, went up 20.5% compared to the prior year as comparable digital sales rose by 118% YoY.
  • After strong holiday sales, online sales gained even more momentum as Americans cashed in their $600 stimulus checks in January.
  • Store sales increased by 6.9%, digital sales increased 118%, and same-day service grew 212%.
  • As impressive as they are, both metrics show a deceleration in growth rates versus the third quarter.
  • In mid-January, Target reported that sales grew 17% during the holidays, which is a slight slowdown from the third quarter’s 21% spike, but it is still a lot better than the 9% that Walmart experienced.

So why did the stock sell-off?

Target did not provide guidance within their earnings report, and this has spooked investors.

  • Target also reported on-GAAP EPS of $2.67, beating estimates by $.13, and revenue of $28.34B beating estimates by $920M.
  • The only real forward direction that Target provided is that they will spend $ 4B annually for the next several years.
  • A big step up from 2020 where they spend $2.7B and in 2019, they spent $3B.
  • Target is planning to increase the number of stores by 30-40 stores annually.
  • Target plans to remodel 150 stores this year and increase that number to 200 in the following year.
  • Investors did not take to this news lightly, and the stock price reflected it.

Their earnings were solid outside of the spending guidance, and their omnichannel business presence led to their revenue growth.

In conclusion, investors do not like spending more money.

Somethings AREN’T Best Left Unsaid 

Investors often make decisions based on what was said in meetings, press conferences, and interviews. In this case, markets moved because of things that were left unsaid; investors were left with a sour taste after Federal Reserve Chairman Jerome Powell failed to address the Gigantic Elephant in the room. 10-Year Treasury Yields are rising due to expected economic growth and inflation in the future. Due to the pandemic, borrowing is near an all-time high, and any change in interest rates can have a massive multiplier effect across the country. High Growth companies, small businesses, and millions of individuals will face defaults with higher interest rates. This lack of reassurance from Powell sent markets tumbling despite a positive jobs report showing unemployment rates falling to 6.2%. We will have to keep a close eye on the 10-Year Treasury Yield in the future with it carrying such grave implications.

Tesla Divides Believers and Values Skeptics

Elon Musk Mic Drop GIF by FullMag

The market is split between believers and skeptics.

Those who believe that Tesla’s value is limitless and those who are more pessimistic about its prospects, especially given its current market price.

The company’s progress so far in “accelerating the world’s transition to sustainable energy” is a credit to Tesla. Still, there is a lot more left to do in its master plan to justify today’s valuation.

Tesla’s history of executing many of its audacious goals seems to be expected to continue, given the optimism in the current stock price. This gives the company very little room for error.

Read more about it on our website: https://www.tigerwolfcapital.com/tesla-divides-believers-and-skeptics/

REVIEW OF PAST WEEK 3/1 – 3/5

UPCOMING WEEK 3/8 – 3/12

EVENTS & TALKS

March 4th, 2020 : Stock Market Crashing, here’s why.

March 4, 2021

Indices Around The Globe

  • S&P 500 Futures moved below 3,780 for the first time since late January, down 1.25% for the trading session.
  • UK’s FTSE 100 down 0.37% to near 6,650
  • Japan’s Nikkei 225 down 2.13% to near 28,930

Bonds

  • 10-year treasury yield at 1.55%

Commodities

  • Crude oil up 4.72% to near $64.17/barrel, highest in over a year.
  • Gold down 0.91% to near $1,699/oz
  • Silver down 2.92% to near $25.40/oz

Crypto

  • Bitcoin down 4.95% over the last 24 hours to near $48,067

Top News

  • Federal Reserve Chairman Jerome Powell spoke on the state of the U.S. economy at the Wall Street Journal’s Jobs Summit
  • U.S. Initial Jobless Claims data for the last week of February showed a week-over-week increase in new unemployment.
  • U.S. Senate plans to vote on President Joe Biden’s COVID-19 plan at 1 p.m. on Thursday.
  • Costco (NASDAQ:COST) reported worse-than-expected Q2 EPS results. The stock moved lower in after-hours trade.
  • Slack (NYSE:WORK) reported better-than-expected Q4 earnings results. The stock moved slightly higher in after-hours trade.
  • Connecticut’s Governor, Ned Lamont, made an announcement to ease some COVID-19 restrictions in the state. Beginning Friday, March 19, capacity limits will be eliminated for restaurants, retail stores, libraries, and personal services businesses. Face masks, social distancing, and other cleaning protocols will remain in force.

Preview for Friday, March 5

  • Nonfarm Payrolls – 8:30 a.m. EST
  • Unemployment Rate – 8:30 a.m. EST
  • Federal Budget – 2 p.m. EST
  • Baker Hughes Total Rig Count – 1 p.m. EST

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Contact Info

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United States of America

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