In yesterday’s Tematica Investing, at the request of subscribers we expanded our purview of the Tematica Select Investment List to include exchange traded funds (ETFs). With Tematica Pro, we’ll continue we’ve successfully used “Out of the Money” calls tied to ETFs in the past and we’ll continue to do so.

Just because we add an ETF to the Tematica Select Investment List or the Tematica Contender List doesn’t mean it will automatically have a corresponding option play here in Tematica Pro. Case in point, the call options associated with PowerShares NASDAQ Internet ETF (PNQI) are too thinly traded to warrant consideration. No need for a roach motel trade when the two of the major market indices are at or near overbought levels.

Using the Ongoing Shift to Digital and Digital Content Streaming to Take a Call Position

We did reiterate our Tematica Investing Buy rating on both Amazon (AMZN)and Alphabet (GOOGL) shares yesterday. Here in Tematica Pro last week, we added the Amazon (AMZN) January 2017 $800 call options to the Tematica recommended list. As we pointed out in yesterday’s Tematica Investing, the October Retail Sales Report was a strong reminder of the accelerating shift toward digital commerce that is driving Amazon’s business.

Following last week’s 2016 presidential outcome, that pressured higher beta technology companies like Amazon and others, we were stopped out of the AMZN January 2017 calls — although those same calls have bounced back slightly since hitting out $10 stop price. Given the pronounced swings up and down with options that tend to occur when the underlying shares pop or drop, we’re going to exercise a cooling off period to let the shares settle out before jumping back into them.

This has us examining potential call option plays on Alphabet shares. Much like Amazon, Alphabet’s search and advertising business, as well as Google Shopping and YouTube, are all strong beneficiaries of the tailwinds driving our Connected Society investing theme. Also like Amazon shares, GOOGL shares have come under pressure over the last several days, which affords an opportunity compared to just a few weeks ago despite the rebound over the last two days.

As such, we’re adding the Alphabet (GOOGL) January $800 (GOOGL170120C00800000) calls  that last traded at $18.10. Even though the tech-heavy Nasdaq Composite Index isn’t overbought at current levels, the same can’t be said for both the Dow Jones Industrial Average and the Russell 2000. Even though the fundamental and thematic tailwinds are pushing positively on Alphabet’s business, and the company has authorized a massive share repurchase program that will help insulate the shares, we are installing a protective stop loss at $12 to minimize any potential downside. We’d be inclined to buy $18.10  these GOOGL January calls up to $22.

In summary:

• Adding the Alphabet (GOOGL) January $800 (GOOGL170120C00800000) calls that last traded at $18.10.
• Inclined to buy these GOOGL January calls up to $22.
• Installing a protective stop loss at $12.

Adding some flavor with McCormick & Co. (MKC)

One of our all-time favorite companies here at Tematica is spice, marinade and increasingly packaged good company McCormick & Co (MKC), which benefits from our Cash-strapped Consumer theme here in the domestic market, but also our Rise & Fall of the Middle Class one in the emerging markets. McCormick is also that rare breed of a company that for the last 30 years has consecutively increased its dividend.

We’ve shared in recent weeks how consumers are flocking back to grocery stores to take advantage of food deflation while eschewing higher priced restaurants. Channel checks also suggest consumers are trimming back on tipping and alcohol consumption when they do eat out, which is something we’ll keep our eyes on for our Guilty Pleasure investing theme. Back to McCormick, we’re entering the sweet spot (no pun intended) for the company given the holiday season that spans from Thanksgiving to after New Year’s Eve as all that baking and cooking drives demand for the company’s spices and extracts, which command a pretty hefty margin.

Also from a timing perspective, over the last few years, McCormick has announced its annual dividend increase in late November and odds are that will be the timing once again. One of the great things about dividend dynamos companies is, of course, the higher payout, but that same payout tends to drive a step function higher in the stock price. To us, the combination is a powerful one and given the dividend announcement catalyst we are adding the McCormick (MKC) December $95 calls (MKC161216C00095000) that last traded at $0.87 to the Tematica Pro Select List. We’d be inclined to buy these up to $1.25, and we’ll set a protective stop loss at $0.70.

In summary:

• Adding the McCormick (MKC) December $95 calls (MKC161216C00095000) calls that last traded at $0.87 to the Tematica Pro Select List. 
• Inclined to buy these up to $1.25.
• Setting a protective stop loss at $0.70.