Weekend Trader Series
October 2, 2022
Open Positions Update
There are no portfolio updates this week.The following is this week's recommendation:
Livent (LTHM)Place a limit order to buy the Livent (LTHM) January 20, 2023 25-strike call at a limit price within range of the current market asked price when you place your order. At the close on Friday, September 30, this option was offered at $8.20. LTHM closed at $30.65 on Friday, September 30.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, October 31, close the position.
- If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.
The shares of lithium manufacturer Livent (LTHM) hit an all-time high earlier this month, followed by a pullback to the $30 area -- roughly 1.5 times their July lows and 2018 peak -- and its 50-day moving average. With this solid technical foundation in place, it could be a good time to speculate on LTHM's next move higher.
Short interest is up 20% since May, and the shares sold short represent more than 13% of Livent stock's available float. Even during the May buildup, the security was able to rally, which implies most of the shorts are underwater still. And while the shares aren't necessarily "oversold," they're no longer considered "overbought," which has led to pullbacks in the past.
Despite an impressive 25% year-to-date lead, analysts are still less than enthusiastic. Specifically, eight of the 17 in coverage still rate LTHM a "hold," and a shift from this pessimistic bunch could provide tailwinds.
Our recommended January 20, 2023 25 call has a leverage ratio of 2.9, and will double on a 35.1% rise in the underlying shares.
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