Weekend Trader Series
October 9, 2022
Open Positions Update
- Close the Canadian Solar (CSIQ) January 20, 2023, 34-strike call on Monday, October 10. 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:
Airbnb (ABNB)Place a limit order to buy the Airbnb (ABNB) December 16, 2022 115-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 $14.65. ABNB closed at $108.54 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, 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.
After an unsuccessful retest of 2020 and 2021 support at the $130 level last month, Airbnb (ABNB) has sold off sharply. Since its addition to the Nasdaq-100 Index (NDX) in late 2021, the shares have consistently disappointed, currently down roughly 35% year-to-date. More recently, ABNB hit resistance at its 50-day moving average and $115 level – from which the shares broke down below a trendline connecting higher lows since its June bottom.
This week, the stock price peaked just below its early-August earnings close. Shorts have been building their positions since late April, and are likely to use rallies to build more positions as they are profitable and have no urgency to cover.
Recent peak OI at the $115 is the site of the first strike where call OI is higher than put OI for all options expiring through October. Put OI is stacked down below the 90 strike and could act as short-term magnets on additional weakness.
Meanwhile, analysts’ 12-month consensus price target of $140.43 is a roughly 30% premium to current levels. Our recommended December 2022 115-strike put has a leverage ratio of 3.9, and will double in value on a 20.8% drop in the underlying equity.
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