Getting ready for CES and baby it’s cold outside!
Key Updates In This Issue:
- Heading into CES 2018 next week, we will continue to hold the Universal Displays (OLED) January 2018 $170 calls (OLED180119C00170000) that closed last night at 12.66, up just over 29% from our entry point.
- We’re adding the Utilities Select Sector SPDR ETF (XLU) Feb. 16, 2018 54.00 calls (XLU180216C000540000) that closed last night at 0.19 and the Utilities Select Sector SPDR ETF (XLU) March 16, 2018 54.00 calls (XLU180316C000540000) that closed last night at 0.39. There are no set stop losses for these new positions at this time.
Welcome back active thematic traders! We’re a few days into the new year, which means we’ve got some catching up to do as well as a new call option trade recommendation to share given the cold snap that is covering much of the country.
Getting caught up
This week we are back in the saddle as we put the year-end holiday season into our rear-view mirrors. On Tuesday, I shared my thoughts on what I’ll be watching this month in this week’s Monday Morning Kickoff and expanded a bit further in yesterdays’ Tematica Investing, where I boosted several price targets for positions on the Tematica Investing Select List.
It’s been a little bit since our last Tematica Options+ missive to you and that means we should first revisit the active positions we had heading into the holidays. The news, I’m afraid, is bittersweet. On the one hand, our Universal Displays (OLED) January 2018 $170 calls (OLED180119C00170000) are doing rather well, closing last night up 29% from our December entry point. As I shared in yesterday’s Tematica Investing, next week we have the annual technology trade show, CES 2018, and organic light emitting diode TVs should be in abundance and odds are we’ll see a few smartphone announcements as well. Even ahead of the event, I’m now hearing that Apple (AAPL) could introduce an iPhone XPlus model with a larger screen compared to the iPhone X, and yes it will feature an organic light emitting diode display. The bottom line is we have a few weeks to go until our January OLED options expire, and we will continue to keep the position in play at least until the news from CES 2018 is digested.
- Heading into CES 2018 next week, we will continue to hold the Universal Displays (OLED) January 2018 $170 calls (OLED180119C00170000) that closed last night at 12.66, up just over 29% from our entry point.
As I mentioned, the update news is bittersweet and that was the sweet part. The bitter part is we were stopped out of both the Amazon (AMZN) January 2018 $1200 calls (AMZN180119C01200000) and the Applied Materials (AMAT) January 2018 $55 calls (AMAT180119C00055000) last Friday. For those keeping score, they generated returns of -56% and -78%, respectively. I’m not pleased with that, especially given the rebound in both AMZN and AMAT shares this week, but the glass is half full view is we were stopped out right at the end of 2017, which means we can use those losses to offset gains from the 10 positions that returned in the range of 60% to 393% during the last four months of the year.
Adding XLU calls ‘cause baby it’s cold outside
One of the common topics across the news these last several days has been the cold temperatures that have hit much of the country setting dozens of daily record lows along the way. As bad as it has been, it’s poised to get even worse as arctic cold air is set to keep the cold outbreak intact across the Plains, Midwest, South, and East into the end of this week. Based on reports, we’re likely to see more daily record lows with wind chills sending temperatures to dangerously cold levels. At the same time, the Northeast is preparing for winter storm Grayson that will feature heavy snow and blizzard conditions. As Grayson makes its way north it is leaving a trail of snow and ice in the South.
When it gets cold outside, people turn up the heat plain and simple and that is leading me to once again add a call option play on the Utilities Select Sector SPDR ETF (XLU). With XLU shares back in oversold territory and temperatures hitting new or near new record lows, we’re adding the Utilities Select Sector SPDR ETF (XLU) Feb. 16, 2018 54.00 calls (XLU180216C000540000) that closed last night at 0.19 and the Utilities Select Sector SPDR ETF (XLU) March 16, 2018 54.00 calls (XLU180316C000540000) that closed last night at 0.39.
This layered call option approach means we’ll get at least two Industrial Production reports that should show a pickup in utility output due to the current cold temps. We’d be buyers of the February XLU calls up to 0.30 and buyers of the March XLU calls up to 0.55. Given the current oversold nature of the underlying XLU shares, we’ll hold off adding stop losses for these two positions for now, but as they climb higher we’ll look to add them.
- We’re adding the Utilities Select Sector SPDR ETF (XLU) Feb. 16, 2018 54.00 calls (XLU180216C000540000) that closed last night at 0.19 and the Utilities Select Sector SPDR ETF (XLU) March 16, 2018 54.00 calls (XLU180316C000540000) that closed last night at 0.39. There are no set stop losses for these new positions at this time.
