Weekend Trader Alert
October 2, 2022
Open Positions Update
The following is this week's recommendation:
- The Philip Morris International (PM) November 18, 2022, 97.50-strike put was closed after hitting its target profit of +100%. If you have not already done so, please close out of your PM position at the earliest opportunity.
General Mills (GIS)Place a limit order to buy the General Mills (GIS) January 20, 2023 72.50-strike call at a limit price within range of the current market asked price when you place your order. At the close on Friday, September 30, this option was offered at $6.90. GIS closed at $76.61 on Friday, September 30.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.
The shares of General Mills (GIS) are holding onto a pre-earnings candle pattern on the charts, and trying to hold their post-earnings gap lower. In addition, the equity is flagging into its 20- and 50-day moving averages -- both of which were significant during past bull rallies -- and bounced off its July highs at $76.50 on Friday. These highs could be supportive in the event of an earnings pullback, while GIS' Friday lows bounced right at the 61.8% Fibonacci retracement.
Despite its broader-market outperformance, analysts are pessimistic towards General Mills, and an unwinding of this pessimism could have bullish implications. Digging deeper, just two of the 19 covering brokerages rate the equity a "buy," while the rest recommend a tepid "hold" or worse.
A shift in the options pits could also give GIS a boost, as puts are popular at the moment. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.45 ranks higher than 74% of annual readings, and spikes in this range ignited rallies in the past and have been relatively consistent this year. Plus, peak put at the 75-strike is holding as support.
Our recommended January 20, 2023 72.50 call has a leverage ratio of 7.5, and will double on a 12.6% pop in the underlying security.
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