Trading Tips Blog

Heavily shorted stocks are susceptible to large rallies, even if their fundamentals don’t justify them. Shares of Tesla Motors (TSLA) have nearly quadrupled in the past six months. While it may be a bit late to get in at a reasonable price there, the fact remains that the company was controversial. Some saw the move as overdue, and others think the move is crazy. One way to tell that there was this controversy was with the company’s short interest. Stocks with high short ...
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Trader bets on 22 percent drop in shares by April. Put options expiring in April with a $10 strike price on Teva Pharmaceuticals (TEVA) saw a nearly-10-fold rise in volume. The option went from under 700 contracts to over 6,800. The bet, expiring in 57 days, is just over 20 percent out-of-the-money, as shares trade just over $12. The buyer of the put option also paid about $0.35 per contract, so shares would need to drop to about $9.65 to profit at expiration. Shares ...
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Trader bets on rally through month-end. February 28th $123 call options on Paypal (PYPL) recently saw a 44-fold rise in volume. Over 7,010 contracts traded against a prior open interest of 161. The bet, expiring in 10 days, is right at-the-money, given a recent share price of $122.99. It should move dollar-for-dollar upward with shares, less the time premium. The buyer of these options paid about $2.00 each, so shares will need to hit $125 by the end of the month to ...
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This “Black Swan” Strategy can Protect Your Portfolio With a Minimal Stake Many investors have been waiting for the other shoe to drop in markets since the financial crisis. Some have stayed entirely on the sidelines. They’ve missed out on the greatest stock market rally of all time, fueled by historically low interest rates. Others have kept a lot of cash on the sideline and underperformed. But those who have stayed invested have done well. With the right strategy, they can also hedge ...
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Trader bets on decline in shares this year. December 2020 $37 put options on AT&T (T) recently saw a 10-fold rise in volume. Over 1,600 contracts traded on an option that had a prior open interest of just 156 contracts. The bet expires 304 days. For the bet to move in-the-money, AT&T shares will need to drop about $1.25 from their current price near $38.25. That’s about 3.3 percent. The buyer of the puts also paid about $2.37. Ultimately, shares will need to trade ...
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Trader bets on continued rally following earnings. June 2020 $340 calls on Nvidia (NVDA) saw a 13-fold rise in volume in recent trading. The options went from 100 open contracts to over 1,300. The bet, expiring in 123 days, is that shares will rally about 17.2 percent from their current price near $290. The option buyer paid about $7.80 per share, so shares will need to trade closer to $348 to profit at expiration. That’s a full 20 percent higher. Shares of the company ...
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Trader bets on further decline after sales miss. July 17th put options with a $20 strike on Kraft Heinz (KHC) saw a 9-fold rise in volume, going from 112 open trades to just over 1,030. The trade, expiring in 154 days, would move in-the-money if shares dropped about 18 percent from their current price near $27.50. The trader paid $0.23, or $23 per contract, to make the bet, so shares would need to drop to $19.70, well below the stock’s 52-week lows, to ...
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Trader bets on big move in the next two weeks. February 28th call options with a $121 strike on Target (TGT) saw a 194-fold explosion in volume, going from a mere 122 open contracts to a volume of over 23,736 contracts. The bet expires in just 15 days. It’s a bet that shares can rise about $3 from their price around $118, or 2.5 percent. The trader buying the options paid $0.98, so shares will really need to close north of $122 at ...
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