A Market Environment Nightmare for Active Trades and Option Plays
Key points in this issue
- We will tread very cautiously near-term as the market continues to be influenced by trade, not fundamentals, which is vexing active traders and options players.
- We will continue to hold our Dycom (DY) December 2018 110.00 calls (DY181221C00110000) that closed last night at 4.00 and keep our stop loss at 3.00.
- We continue to wait for MoneyOnMobile’s (MOMT) 10-K filing as well as the expected uplisting to the Nasdaq market.
Among the insights contained in yesterday’s weekly Tematica Investing issue, I mentioned how the current market environment has not been a conducive one for active trades and options players. With fundamentals essentially out the window, the back and forth of the potential trade war has the market trading day to day with the latest Washington trade policy meeting either hitting or propping the stock market. Given the relationship between a stock and its respective options, these gyrations have led to a large percentage of options positions being stopped out.
Over the last week our Tematica Options+ call option positions in Netflix (NFLX) and AMC Networks (AMCX) call option positions, which brings the total number of stop-outs to roughly a dozen since mid-May. That’s when the trade conversation went from a slow boil to a roiling one.
Last night it appears that President Trump has garnered some trade concessions from the European Union. While that led to a surge in the major market indices during their last hour of trading yesterday, let’s focus on that both the US and EU will work to “resolve their dispute over metals duties, while also promoting bilateral trade.” Not exactly a done deal, and let’s not forget about the trade issues with China as well as Canada and Mexico. Does this likely give Trump more bargaining leverage? Yes, but it’s far from a done deal across the board, which means more trade drama is to be had in the coming days and weeks.
I continue to be optimistic about the potential for President Trump to reset trade relations, but the reality is that continued drama to achieve that goal will keep the stock market in a state not too dissimilar from one riding Kingda Ka, one of the world’s fastest (at 128 mph) and tallest roller coaster that has a 418 drop. As Lenore Hawkins, Tematica’s Chief Macro Strategist, and I wrote in Cocktail Investing: Distilling Everyday Noise Into Clear Investing Signals when faced with volatile times in the market sometimes the smartest thing to do is sit back and be patient.
Near-term, I’m going to take my own advice so we don’t get whipsawed and stopped out of any options positions, which would only serve to nibble away at subscriber capital.
We’ll keep our existing positions in Dycom (DY) calls in place, especially given the favorable 5G commentary that was had during the earnings conference calls by AT&T (T) and Verizon Communications. If you missed those comments as well as favorable 5G ones from Qualcomm (QCOM), you can find them here.
We will also keep our stock position in MoneyOnMobile (MOMT) in play. The next catalyst for those shares will likely be contained in the soon to be filed 10-K, which should be followed by the shares being uplisted to the Nasdaq market.
