March 21, 2023 Terry’s Tips Trade Alert - Honey Badger Portfolio
We are adding a spread to raise delta:
BTO 1 QQQ 19May23 310 call (QQQ230519C310)
STO 1 QQQ 31Mar23 319 call (QQQ230331C319) for a debit of $11.45 (buying a diagonal)
Be prepared to change this (these) price limit(s) by $.05 or more in order to get an execution.
Happy trading.
Jon
March 20, 2023
Dear [[firstname]],
Here is your Option Trade of the Week, as included in this past weekend’s Saturday Report for our Terry’s Tips Insider Members. It was another post-earnings play, a strategy we’ve had success with of late.
Before getting to the trade, I wanted to let you know that the Terry's Tips portfolios are gaining steam. The combined four portfolios are beating the S&P 500, led by the Honey Badger portfolio (it trades QQQ options), which is up a whopping 19% so far this year! Don’t forget that our portfolios beat their underlying stock performance by an average of 22% in 2022.
Don’t get left behind. For our loyal newsletter subscribers, I’ve decided to keep the sale going that saves you more than 50% on a monthly subscription to Terry's Tips that includes …
To become a Terry's Tips Insider Member, just Click Here, select Sign Up Now and use Coupon Code D21M to start a monthly subscription to Terry’s Tips for half off. You can cancel after a month but, of course, still keep all the valuable reports.
We look forward to having you join us! Now on to the trade ...
If You Build It ...
They will buy. At least that’s what homebuilders think based on the latest builder confidence survey, which ticked higher for the third month in a row. On Wednesday, the Census Bureau will release February’s residential construction numbers, and the market is expecting gains in starts and completions.
On the company level, Lennar (LEN) reported earnings this week that easily beat on the top and bottom lines. The company also projected home sales for next quarter and the full year that are higher than the consensus analyst estimates. The stock received several target price increases, though no ratings upgrades. The average target price is about 10% above Friday’s close, while the average rating is between a buy and hold. Given that the stock is up nearly 50% in the past five months, it seems some analysts are behind the curve.
The stock is currently riding along the support of its 50-day moving average which came into play after a pullback from a 52-week high hit in early February. The stock pulled away from this trendline after the earnings report, though not far enough to take its support out of play.
Note that the short strike of our put spread is below the 50-day (blue line) and the 20-day (red line), which has turned higher. Thus, the stock will have two pierce two levels of support to move the spread into the money.
If you agree that LEN will maintain its long-term uptrend, using the support of its 50-day and 20-day moving averages, consider the following trade that relies on the stock staying above $97.5 (green line) through expiration in 5 weeks:
Buy to Open the LEN 21 Apr 95 put (LEN230421P95)
Sell to Open the LEN 21 Apr 97.5 put (LEN230421P97.5) for a credit of $0.55 (selling a vertical)
This credit is $0.02 less than the mid-point price of the spread at Friday’s $103.50 close. Unless LEN surges, you should be able to get close to that price.
The commission on this trade should be no more than $1.30 per spread. Each spread would then yield $53.70. This trade reduces your buying power by $250, making your net investment $196.30 per spread ($250 - $53.70). If LEN closes above $97.50 on Apr. 21, both options will expire worthless and your return on the spread would be 27% ($53.70/$196.30).
Any questions? Email Terry@terrystips.com. Thank you again for being a part of the Terry's Tips newsletter.
Happy trading,
Jon
March 7, 2023
Dear [[firstname]],
Here is your Option Trade of the Week, as given to our Terry’s Tips Insider Members as part of their Saturday Report. I again stayed on the bearish side this week, as this market is looking very vulnerable, especially after today’s Congressional testimony from Jerome Powell.
However, as I did a couple of weeks ago, I’m revising the trade because the position has run away from the opening price. Because of a huge plunge in the stock price today, the trade is already up nearly 20% in just two days. Because I still believe in the premise of the trade, I’m changing the strikes to give you a similar entry credit … and, of course, profit. Good luck with it.
Before getting to the trade, I wanted to let you know that the Terry's Tips portfolios are on a hot streak. The combined four portfolios are now beating the S&P 500, led by the Boomer's Revenge portfolio, which is up a whopping 18% so far this year! That’s on top of the 33% gain during last year’s horrible market performance. Overall, our portfolios beat their underlying stock performance by an average of 22% in 2022.
Don’t get left behind. For our loyal newsletter subscribers, I’ve decided to keep the sale going that saves you more than 50% on a monthly subscription to Terry's Tips. For just $98, you'll get:
To become a Terry's Tips Insider Member, just Click Here, select Sign Up Now and use Coupon Code D21M to start a monthly subscription to Terry’s Tips for half off. You can cancel after a month but, of course, still keep all the valuable reports.
We look forward to having you join us! Now on to the trade ...
Cry Me a Rivian
Electric car maker Rivian (RIVN) reported earnings on Tuesday after the bell that were mixed at best. The company narrowed its adjusted Q4 loss to beat the consensus estimate but missed considerably on revenue. Of greater importance, however, is RIVN’s expected 2023 production of 50,000 compared to the expected 60,000 units.
But on Friday, word “leaked” of a 62,000-unit goal discussed at an internal company meeting. The shares reacted with a 7.6% surge, but still closed the week lower. Although nobody knows for sure, this looks to me like a classic “buy the rumor, sell the news” scenario.
What is known, however, is that the stock was hit with a number of lowered price targets on the earnings news. Yet even with the reductions, the average target price is nearly double Friday’s close. That’s awfully optimistic for a stock that is down 70% from its 52-week high and 8% so far this year. Moreover, the EV space is getting more crowded, even as the dominant player – Tesla – is enjoying a resurgence.
On the chart, RIVN is trading toward the bottom of a two-month range that is being pressured by the declining 20-day (red line) and 50-day (blue line) moving averages. The short call strike of our bearish credit spread sits above these trendlines, so the stock will have to break through this double-barrelled resistance to move the spread into the money.
If you agree that RIVN will struggle with technical resistance following an uninspiring earnings report, consider the following trade that relies on the stock staying below $19 (green line) through expiration in 6 weeks:
Buy to Open the RIVN 14 Apr 18 call (RIVN230414C18)
Sell to Open the RIVN 14 Apr 16 call (RIVN230414C16) for a credit of $0.45 (selling a vertical)
This credit is $0.01 less than the mid-point price of the spread at Tuesday’s $14.64 close. Unless RIVN falls quickly, you should be able to get close to that price.
The commission on this trade should be no more than $1.30 per spread. Each spread would then yield $43.70. This trade reduces your buying power by $200, making your net investment $156.30 per spread ($200 - $43.70). If RIVN closes below $16 on Apr. 14, both options will expire worthless and your return on the spread would be 28% ($43.70/$156.30).
Testimonial of the Week
I have been a subscriber for about a year. I autotrade in 2 different accounts, all your strategies. I read everything you write on Saturdays. I love your happiness thoughts and everything else. I usually do not communicate at all but I had to tell you how well my accounts with you are doing compared to everything else. You are awesome. Keep up the good work. Thank you. - Maya
Any questions? Email Terry@terrystips.com. Thank you again for being a part of the Terry's Tips newsletter.
Happy trading,
Jon
Monday, February 20th. Market closed for Washington's birthday.
Friday, April 7th. Market closed for Good Friday.
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