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CPI is HOT, AMC Max Pain, and Stocks to Watch

November 14th, 2021
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Market Update for the Week Ahead

Welcome back to The Juice for your weekly options breakdown and market update.

 

What happened last week?

The CPI print came in much hotter than anticipated with a 6.2% YoY increase and a benchmark number that hasn’t been seen in almost 30 years. Increased energy prices, specifically oil, has been a prominent factor in the growing consumer price index number, but some of the other principal components causing the higher-than-expected CPI were a continued surge in used cars & trucks (as has been the trend for a while), housing, and groceries.

  • Traders on social media: “inflation is here to stay”
  • Investors on FinTwit: “inflation is here to stay”
  • Economists: “inflation is here to stay”
  • The Fed: “inflation is transitory”

So who is right? What’s kind of strange is that the average Joe day-trader has been saying that inflation will be long-lasting for the last 6 months, while the Fed continue to push a narrative that it will all pass, and soon.

On Thursday, after the CPI print, the US 30-year bond started tumbling several BPS, but then eventually recovered. Higher inflation is not good for bond-holders as it essentially erodes the purchasing power of their fixed interest payments. When you are already making close to nothing on bonds in today’s environment you most certainly don’t want to be making even less. Here’s a look at the HYG chart, one of the most used high-yield bond ETFs, and the sell-off it had. 

Live Charts

 

Another glance at the sector ETFs option flow from Friday, which saw continued bearish activity roll through HYG along with some bullish flow in Gold and Silver ETFs

 

AMC & Gamestop both close at Max Pain

Another interesting thing happened yesterday. Both AMC and Gamestop (GME) happened to close right at the “maximum pain” level for options buyers. Max pain is a commonly known theory that from time to time stocks just so happen to close at the max pain strike for options buyers, leaving the options writers (usually market-makers), with the most profit. On Friday, AMC’s max pain was the $40 strike and GME’s was the $202 strike. What happens next will shock you! AMC closed the week at exactly $40.00 while GME closed $202.10. Nothing to see here folks, just don’t ask questions and keep walking along. Here are their max pain charts.

 

AMC

AMC Max Pain

GME

GME Max Pain

 

Unusual Options Activity

VIG offers many pre-built scans, but for those of you that enjoy doing some option sleuthing it’s also possible to go through your own custom scans to find unusual activity. There are a few reasons I search for longer-dated activity, but the main reason is that short-term option trades are highly unpredictable that could simply be a fund chasing momentum and gamma or collecting premium on thousands of contracts expiring in a day or two. The further-dated options give more of an idea of where some big players may think the stock will go. Let’s dive in.

Cameco Corp - $CCJ 

CCJ Options Flow

The Uranium company has been on a strong run for a while and it looks like a big player may be bullish on a continuation of the trend. What I found could be a large bull spread being opened for January 2022 expiration. The play:

  • $27 strike high energy calls leaning on the ask, purchased 500 contracts for $150k in premium.
  • $34 strike low energy calls leaning on the bid, sold 500 contracts for $50k in premium.

This spread would require the CCJ share price to get anywhere above $29 to become profitable. Max profit is until shares hit $34 and max loss is the difference in premium paid versus collected, in this case $100k is at risk.

 

Ford- $F

Ford Options FlowThe Ford chart has been on a monstrous uprising. Share price has doubled since 12 months ago, gone up roughly 40% from September, and currently riding on the back of their stake in Rivian which is now valued at approximately $10 billion.

Ford was catching quite a few high energy puts bought closer to the ask, and some low energy calls being sold at the bid. there are two possible scenarios that may be at play here. First, a large player is protecting their position after a big run to the upside by placing these bets as hedges. Second, a player is starting a position thinking Ford may just be over-valued at these levels.

Whether it’s a hedge or not someone might be thinking Ford has run-up more than it realistically should have. This is going to be an interesting one to watch mainly by following what happens to Rivian (RIVN) who’s valuation has skyrocketed

 

Amyris - $AMRS

Not a really well-known ticker, AMRS -a biotech company, is down nearly 65% from earlier this year and down 45% in the last week. Shares were down on the news that the company priced 600 million of convertible notes due in 2026.

The chart does not look good, but a player may be thinking the same thing and is expecting more volatility within this name. Here’s what the option flow is telling us.

AMRS Options Flow

The player purchased a long straddle, which is when both a call option and put option are bought at the same strike and expiration. Essentially betting that the stock will move big in either direction. In this case, they may be looking for large bounce or the stock to possibly continue tanking to the downside in the long-term (these expire in 3 years). The play:

  • 1,000 calls bought at a strike price of $8 and January 2024 expiration. $400k premium.
  • 1,000 puts bought at a strike price of $8 and January 2024 expiration. $360k premium.

Break-even for this position would be the stock price going below 40 cents in which case the company would be very close to not being solvent, OR, the stock price being above $15 in three years from now. Of note: AMRS was actually above $15 three months ago.

AMRS Stock Chart

 

Stocks to Watch This Week 

All you need to do everyday to look for Juicy setups is to use the vig Terminal and click on the Alerts. If you filter for "Combo" alerts, you can see what the system is picking up as potential strong Bullish and strong Bearish setups. These setups incorporate Money Flow, Options Flow, Volume, and Momentum. Here are a few setups which could potentially be bullish early this week. There are about 25-50 setups a day combined between bullish and bearish classifications. Make sure to check this out early this week! 

 

ARK Fintech ETF - $ARKF

ARKF Price Chart and Options Flow

 

ARK Industrial ETF - $ARKQ 

ARKQ price chart and options flow

 

Baidu ADR - $BIDU 

BIDU price chart and options flow

 

Summary 

We hope everyone has a great trading week! Make sure to check out our Fantasy Stock Games this week as we start Week 3 of the contests and we are starting to build out player rankings plus a whole lot more. Enter for free to any of our numerous contests this week and show your stock and crypto pick 'em skills! 

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