Weekend Trader Alert

Weekend Trader Alert

April 9, 2023

Open Positions Update

There are no portfolio updates this week.

The following is this week's recommendation:


Walgreens Boots Alliance (WBA)

Place a limit order to buy the Walgreens Boots Alliance (WBA) June 16, 2023 37.50-strike put at a limit price within range of the current market asked price when you place your order. At the close on Thursday, April 6, this option was offered at $2.78. WBA closed at $35.78 on Thursday, April 6.

Do not attempt to enter this position after Monday's close.

Please use the following guidelines to manage the position:
  • Exit the position if the option is at a 100% gain from your entry price.
  • If the option has not reached its target profit by 3:00 p.m. Eastern time on Monday, May 8, close the position.
  • If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.
Shares of Walgreens Boots Alliance (WBA) just hit zone resistance at the $37 and $36 range, and faded in a strong tape. The equity also failed at its 2022 low anchored weighed volume weighted average price (AVWAP), from where it broke down in February. WBA has faced pressure from its 200-day moving average since March 2022, and just ran into two historically bearish trendlines -- the 120- and 160-day moving averages, which typically pressure shares lower over the following 21-days.


Large open interest (OI) at the 36-strike call level just rejected Walgreens stock, with peak OI sitting at the 37.50-strike call, where we have seen large call selling in the July expiration. An unwinding of options traders' pessimism could add headwinds, as the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.56 sits in the low 3rd percentile of annual readings. It's worth mentioning that SOIR trending lower from a peak has produced downtrends.

Now looks like the perfect time to consider options, as traders are pricing in low volatility expectations at the moment. This is per WBA's Schaeffer' Volatility Index (SVI) of 24% that ranks higher than just 4% of reading from the past 12 months. Plus, the stock ranks high on Schaeffer's Volatility Scorecard (SVS), with a score of 71 out of 100. In other words, the security typically beats said volatility expectations.

Our recommended June 37.50-strike put has a leverage ratio of 8.6, and will double in value on a 10.7% dip in the underlying shares.


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