Weekend Trader Alert
October 9, 2022
Open Positions Update
There are no portfolio updates this week.The following is this week's recommendation:
Hilton Hotels (HLT)Place a limit order to buy the Hilton Hotels (HLT) January 20, 2023 130-strike put at a limit price within range of the current market asked price when you place your order. At the close on Friday, October 7, this option was offered at $14.90. HLT closed at $121.37 on Friday, October 7.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, November 7, 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 Hilton Hotels (HLT) were just rejected at a confluence of moving averages as well as their -20% year-to-date level. Now, breaking back below its $123.50 gap levels from this summer, HLT’s short-term bear flag breakdown is part of a larger bearish triangle that looks vulnerable to collapse. Aside from failing at the $128.50-$126 level – which served as resistance for the first half of 2021 – the stock was rejected ahead of the peak call level, with no meaningful put open interest until the 105-strike, which could act as a magnet.
Headwinds could come from a round of bear notes, too. Of the 20 analysts in coverage, 10 carry a “buy” or better rating, and 10 a tepid “hold.” Meanwhile, short interest represents just 1.8% of the stock’s available float, and is nearing levels where shorts have tended to start increasing their positions, which has put pressure on the stock price in the past.
HLT’s 10-day call/put volume ratio of 3.64 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), ranks higher than 90% of all other readings from the past year. This indicates calls being picked up at a much faster-than-usual pace relative to the last 12 months, leaving plenty of optimism to unwind.
Our recommended January 2023 130-strike put has a leverage ratio of 4.7, and will double in value on a 17.4% drop in the underlying equity.
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