I sold some calls today. The buyer seems to have done a very professional job by shorting the underlying stock over ~40 minutes after buying the calls. They locked in a $0.05 / share profit if they take delivery, or they may make more if the stock falls below the strike price prior to Friday at options expiration.
The buyer is positioned to ride this position out until expiration.
We both still have the option (pun intended) to close out the position before expiration. If we do, I get to keep my shares. The call buyer would receive premium, then cover their short by buying back stock.
I am writing this up because I have made the same trade three times in the past few days. The first two times I think the call buyer was either retail, or not professional. They held a naked call position, and bought back my calls at a very low price, right around market close. I even saw a comment in StockTwits that said something like 'darn it, my calls are getting killed.'
This last time, the calls retained their value such that if I wanted to, I could buy a bunch of stock, sell more calls, and if they take delivery I lock in around $0.05 / share profit.
If you want to better understand this, please give me a call.
Maybe we could set up a consultation for $250 and I will walk you through the trade. I am not keeping this trade data stored on my systems, so I would show you where to find the data.
I am Jeffrey Cohen, and after reviewing the model run for this weekend I see a few things that I would like to share about this market. Our money is tied up (voluntarily), so we are not investing on Monday morning, so we might as well share some insight. Maybe we attract a few new clients.
If interested, just give us a call or email from the Home/Contacts page here.
1) Actual market volatility is a tiny bit higher tonight after falling for months. Could be a one-off. We hypothesize an inverse relationship between price change variance and stock prices. If this becomes a trend, then new investments will require a higher expected return (a.k.a. lower prices).
2) The same stocks keep showing up at the top of our Chicago Quantum Net Score. Lately, they seem to be extra correlated to the S&P 500 equity index ETF SPY. We see this in elevated BETA values.
3) Elevated BETA values are where it is at in our model run. Not all high-beta stocks make the cut (some score quite low and are shorts/sells), but pretty much all of the top 20 model picks have high BETA values (greater than 3.0). So, high BETA does not make a stock attractive, but all attractive stocks in our model have high BETA values.
4) We are asking ourselves if the movement at the top of our model is intentional. Are these stocks being slammed higher and lower with the SPY, but always with the closing price coming back up or down so the variance and 'price shock' is less than it could be. We see that with one of our holdings, $SKLZ Skillz Inc., which is also a top 5 Chicago Quantum Net Score stock. It goes up and down massively intra-day, but usually closes off the high and low of the day.
5) The Chicago Quantum Net Score model has informed most of our current portfolio, and it is doing quite well for us. In addition, the rest of the top CQNS long individual stocks are also quite active, and rise and fall with true conviction. There are moves in these names that bless the savvy day trader.
6) Not to name names, but we do see a new stock (eCommerce in a way) towards the top of our list. the price is quite low, but that does not mean it is inexpensive, only that it has a share price under $1.00. The stock is QRTEA Qurate Retail Inc., and is representative of what we are seeing at the top of our model. Lower market capitalization stocks with high (and often increasing) BETA values that have been moving with the market but with less volatility than other high BETA stocks.
In conclusion, we see a tiny dark cloud on the horizon in increased actual price volatility, and we see a significant number of high risk stocks camping out in the list of 'best' CQNS long stocks. Buyer beware, and do your due diligence.
Our interpretation of statements made by Federal Reserve Bank Chairman Jerome Powell:
The Fed is not relying on private actions:
Tighter financial conditions driven by private action would need to be persistent and material, and independent of Fed / global central bank actions.
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