Weekend Trader Series
September 8, 2024
Open Positions Update
- Close the Palantir Technologies (PLTR) October 18, 2024, 30-strike call on Monday, September 9. 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:
Merck (MRK)Place a limit order to buy the Merck (MRK) November 15, 2024 125-strike put at a limit price within range of the current market asked price when you place your order. At the close on Friday, September 6, this option was offered at $10.90. MRK closed at $117.84 on Friday, September 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, September 30, close the position.
- If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.
Merck (MRK) just closed below its declining 50-day moving average at the 120-strike, where there is a large amount of call open interest (OI) in the September series. It’s also now trading below the $121 area, which acted as support in March and June and was the site of a major high in May 2023. Plus, on Thursday and Friday, shares closed below $119.30, which is a 50% retracement of a pre-earnings close in July and the post-earnings low, as well as the sit of the round $300 billion market cap.
It's also worth noting that call OI increased at a rate of about 4:1 the past week. What’s more, Wall Street looks to be too enthused despite the negative price action, with 25 of 28 in coverage rating the security a “buy.” This leaves MRK vulnerable to a round of bear notes.
Our recommended November 125 put has a leverage ratio of 5.9, and will double on an 12.4% fall in the underlying shares.
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