11/22 Daily Market Note: The Melt Up Continues Across the Board. How long can this last?
Made Public: 11/22 Premium Strategy Note
Note: This Daily Note is shared with the public. Please share with your network so that we can reach/help more folks. Thank you to Interactive Brokers (pays 4.8% Interest, has European and HK Trading, and offers good execution) for partnering with my content.
Hi Folks -
The main event leading into today was NVDA’s earnings which were fundamentally strong – they provided guidance to do $20 billion in sales for the 4th quarter. That was in comparison to the $17.9 billion in expectations. They beat guidance (which was already optimistic) by 10%. The company’s gross margins also came in ahead of expectations at 75% vs. the 72.5% estimate. In short, NVDA is firing on all cylinders but given the stock’s recent run-up as well as other opportunities in the marketplace, the stock is taking a breather today. This month alone, NVDA has run up 25% - and given that there was significant open interest in the 600 call options expiring for this Friday, it was only natural that the stock found gravity post-earnings.
600 on NVDA was too aggressive of a target and Option Premium sellers essentially captured the weekly premiums on this name.
What we’ve been discussing so far
In China updates, Trip.com (TCOM) quickly found its footing after the company bounced back in Hong Kong trading (HK-9961) as investors probably realized the “peak travel” narrative shared by investment bank Nomura may have caused an over-reaction. I’ve followed this name for a long time, and yesterday’s post-earnings reaction served as both a tradable and investing entry (depending on a person’s individual goals) and was shared with our Community in our pre-market note on Whatsapp. China stocks tend to have concentrated holders who are quick to reshuffle positions and are sensitive to sentiment but good companies are good companies. Shorter-term I see this name reclaiming the 35.5-36 region (which it did today). Long-term looking out 1 year I see TCOM revisiting 43-45.
For trading purposes, yesterday’s entry and today’s upside action offered about a 5-7% opportunity in a rather short window of time.
Retail favorite BABA has been challenging on the investing side, so last week, I discussed with our members that the proper vehicle to profit from this stock is by repositioning to longer-dated Put Selling. Direct Shares and Calls, for now, is not the optimal positioning for this name. Hopefully this changes in the future of course.
I use theta decay strategies when I am not yet fully confident the stock is ready to make a big move higher and I’m in a “play it safe” mindset.
China/Hang Seng is one of the most difficult sectors to trade, but I remain committed to finding the best opportunities and vehicles to get exposure depending on the context.
And finally Kroger (KR) also gave us an opening earlier this week to find some alpha. It’s positioned in a conservative industry and was offered at a conservative price (and valuation) earlier this week. Discussed at 41-42 with our members.
The nature of upside on Kroger given its business model is modest, so I’ve sold calls on it at strike 45 with 12/1 Expiry.
Other ideas I remain constructive.
Folks, I will continue to do my best to find alpha-generating ideas in an increasingly expensive market. I can’t chase momentum at such high levels, so I have to find value. And value is really hard to find right now, which I’m sure is widely agreed.
I believe that a traditional buy-and-hold portfolio added with tactical strategy in Direct Shares targeting 2-4% on a repeated basis and thoughtful Option Selling has the potential to find diversification benefits as well as add incremental upside on top of a regular S&P 500 portfolio.
Have a great Thanksgiving with friends & family. I may have a new Black Friday offer coming later this week. Stay tuned!
I’ll be back on Monday with our Daily Market Notes.
I appreciate our Community here very much. 🦃
-Larry
Disclaimer: My investment community is not investment, financial, or trading advice, but for educational informational purposes only. I am happy to share my personal opinions which I provide as my personal journal. Trading of any kind of securities involves a lot of risk. No guarantee of any profit whatsoever is made. Investors may lose everything they have. Practice extreme caution. No profit is guaranteed whatsoever, You assume the entire cost and risk of any trading or investing activities you choose to undertake. You are solely responsible for making your own investment decisions. Owners/authors of this publication are NOT registered as securities broker-dealers or investment advisors either with the U.S. SEC, CFTC or with any other securities/regulatory authority. Make sure to consult with a registered investment advisor, broker-dealer, and/or financial advisor.