Weekend Trader Series

Weekend Trader Series

January 22, 2023

Open Positions Update

  • The Lennar (LEN) February 17, 2023, 80-strike call reaches its time-stop this Monday, January 23. Close the position at a limit price within range of the current market price when you place the order.
  • Close the Conagra Brands (CAG) March 17, 2023, 37-strike call on Monday, January 23. Close the position at a limit price within the range of the current market price when you place the order.
  • Close the Nasdaq (NDAQ) March 17, 2023, 56.67-strike call on Monday, January 23. Close the position at a limit price within the range of the current market price when you place the order.

The following is this week's recommendation:


Dick's Sporting Goods (DKS)

Place a limit order to buy the Dick's Sporting Goods (DKS) March 17, 2023 115-strike call at a limit price within range of the current market asked price when you place your order. At the close on Friday, January 20, this option was offered at $14.20. DKS closed at $123.05 on Friday, January 20.

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 Tuesday, February 21, close the position.
  • If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.
Retail stock Dick’s Sporting Goods (DKS) was on our internal 52-week high/low implied volatility screen earlier this week, a historically bullish signal for equities. The stock also just pulled back to the $120 area, which coincides with the round $10 billion market cap and was a resistance zone in early 2022 and again from September to December of 2022. Plus, the low this past week corresponds with DKS’ year-over-year breakeven level.
 
With this technical support in place, now looks like a good time to bet on Dick’s Sporting Goods stock’s next leg higher. Plus, the retail stock is still strong even amid recession worries entering this year. 

 
Though shorts have been in covering mode since July, short interest still represents 16.7% of the stock’s available float. Plus, DKS is up about 60% since short covering began.
 
An optimistic shift in the options pits could push the equity higher as well, as DKS’ Schaeffer’s put/call open interest ratio (SOIR) of 2.41 ranks higher than 92% of annual readings. This indicates that short-term traders have rarely been more put-biased.
 
Our recommended March 115-strike call has a leverage ratio of 6.00, and will double on an 16.5% rise in the underlying shares.  

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