Weekend Trader Alert
January 22, 2023
Open Positions Update
- The Caterpillar (CAT) February 17, 2023, 230-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 Altria (MO) June 16, 2023, 45-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 Honeywell (HON) March 17, 2023, 210-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:
Workday (WDAY)Place a limit order to buy the Workday (WDAY) March 17, 2023 170-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 $13.65. WDAY closed at $173.40 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.
The shares of Workday (WDAY) are staging a pennant breakout from a large cup and handle bottoming pattern. Plus, the shares just bounced off a confluence of its 20- and 200-day moving averages, and are now through the key gamma strike at 170 after holding peak put support at the 160-strike.
Plus, 60% of the gamma exposure falls off after today’s expiration, and overhead call exposure dissipates significantly, giving WDAY room to run. Workday stock is jumping from the volume point of the control level.
A shift in analyst sentiment could provide tailwinds as well. Of the 40 analysts in coverage, 11 carry a “hold” or worse rating, which is the most bearish positioning analysts have had on WDAY in the last few years.
Now also looks like a good time to weigh in on the security's next move with options. The stock is seeing attractively priced premiums at the moment, per its Schaeffer's Volatility Index (SVI) of 38%, which sits in the 15th percentile of annual readings. Our recommended March 170-strike call has a leverage ratio of 7.6, and will double on a 13.7% rise in the underlying shares.
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