Super-Toppy Tuesday

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Nasdaq 100 Chart WeeklyUp and up we go! 

There’s a little pullback in the Futures this morning as the Dollar once again tests the 104 mark but the Dow is still at 38,950, S&P 5,115, Nasdaq 18,126 and even the Russell is having a good time at 2,070 and all we have is PMI and Factory Orders this morning – neither likely to derail things. 

As to earnings, out of 41 reporting companies yesterday, only 20 beat estimates and 12 missed, with a similar split on revenues, none were companies we particularly cared about (generally small-cap reports now). Today’s earnings calendar features a diverse cast of characters, from retail giants to lesser-known names across various sectors. Let’s dive in and see who’s worth keeping an eye on.

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Target (TGT) steps up to the plate with a solid beat, delivering an EPS of $2.98 versus the expected $2.41. Looks like America’s still got a bull’s-eye for bargains! Meanwhile, Ross Stores (ROST) and Nordstrom (JWN) are set to report after the bell. We’ll be watching to see if they can keep up with the retail resurgence.

  • In tech, CrowdStrike (CRWD) and HashiCorp (HCP) are on deck. CRWD’s been a cybersecurity darling, but can they keep hackers at bay and investors happy? HCP’s another cloud infrastructure player that’s been making waves, so we will be curious to see if they can keep their head in the clouds and their feet on the ground.
  • ADM (ADM), the agribusiness giant, is also reporting. With food prices being a hot topic, it’ll be interesting to see how they’ve navigated the inflationary environment.
  • Some other names to watch: Nio (NIO), the Chinese EV maker looking to make a splash; Gitlab (GTLB), the software development platform that’s been a developer favorite; and Box (BOX), the cloud content management company that’s been thinking outside the box. For the moment, anything to do with the cloud has been a good bet.

Speaking of good bets – finally someone besides us likes AT&T at $16.80. They were a Top Trade Alert on Sept 28th last year, when the stock tested the $15 line, when we went with a very conservative play:

      • Buy 1,000 shares of T for $15 ($15,000)
      • Sell 20 T 2026 $15 puts for $2.25 ($4,500)
      • Sell 10 T 2026 $15 calls for $1.85 ($1,850)

That’s net $8,700 and we pick up $6,300 (72%) at $15+ and, if assigned 2,000 more at $15, that’s $38,700, which is $12.90/share and that’s fine too. Meanwhile, the dividend is $1.10 ($1,100) per year, which is a 12.6% bonus.

Finviz Chart

NOW Wolfe Resarch has finally seen the light with a $21 target as the costs of 5G investment are pretty much over and now comes the part where they collect the money (which was our premise all along). My side note here is that this applies to many cyclical companies as investors these days have neither the understanding of or patience for cyclical investing – to which we say THANK YOU!  

In the above trade, the stock is now $16,800 and the $15 puts are $1.26 ($2,520) and the $15 calls are $2.87 ($2,870) for net $11,410 so we’re up $2,710 (31%) in less than 6 months but we also collected a 0.28 ($280) dividend on October 6th and January 9th, which brings the total gain up to $3,430 (39.4%) already (you’re welcome!).  Aren’t options fun? 

Dividends are fun too, which is why we like to combine them. Still, as a new trade on T, why should I pay $16,800 for 1,000 shares when I can simply sell 10 of the 2026 $17 puts for $2.20 ($2,200), which nets me in for $14.80? $2,200 is more then you’d collect in dividends over the next 7 quarters ($1,960) so we could leave it as that OR we could set up a fun option spread like:  

    • Sell 10 T 2026 $17 puts for $2.20 ($2,200)
    • Buy 20 T 2026 $15 calls for $2.85 ($5,700) 
    • Sell 20 T 2026 $20 calls for 0.85 ($1,700)

That’s net $1,800 on the $10,000 spread that’s $3,200 in the money to start! At $20, this spread returns net $8,200 (455%) and, if you keep a stop on the $15/20 spread (net $4,000) at $2,200, your worst-case scenario is owning 1,000 shares of T for $17 ($17,000).  

To make $8,200 on the stock going to $20 (up $3.20), you  would need to buy 2,500 shares and tie up $42,000 so, even at full margin in an IRA or 401K account – it’s still a very efficient way to make money trading one of the bluest of the Blue Chip Stocks.  

This is one of our core teachings at PhilStockWorld – you don’t have to take a lot of risks to make a lot of money! The full title of that September 28th Alert for our Members was: “PhilStockWorld Top Trade Alert – Sept 28 2023 – BBY, CAKE, GLW, KO, NLY, T, VALE & WHR” and here’s how the other selections are doing:  

Finviz Chart

Finviz Chart

Finviz Chart

Finviz Chart

Finviz Chart

Finviz Chart

Finviz Chart

We’re still waiting for WHR to come around but I love them long-term down here. VALE became our 2024 Trade of the Year – the stock in which we could devise an options spread most likely to return 300% – we haven’t missed one EVER! 

I do want to point out though, that we are very well-hedged against the possibility of a market downturn – something every good trader should be doing at all times. A lot of our Premium Members at PSW are hedge fund managers looking to learn how to hedge better using options – it’s a tool that gives you very precise control over your portfolio and hedge funds are often scored on their Beta (volatility) ratios.

Don’t ignore the risks but don’t let the risks keep you from making wise investments. People climb cliffs by strategically placing pitons and advancing their positions slowly and carefully and, because people tend to meticulously prepare for rock climbing – the rate of injury is 0.2 injuries per 1,000 hours of climbing vs 15.7 playing football and 22.4 in motor cross.  

Just be careful out there! 

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