Weekend Trader Alert
November 13, 2022
Open Positions Update
- Close the General Mills (GIS) January 20, 2023, 72.50-strike call on Monday, November 14. Close the position at a limit price within the range of the current market price when you place the order.
- Close the Hershey (HSY) January 20, 2023, 210-strike call on Monday, November 14. Close the position at a limit price within the range of the current market price when you place the order.
- Close the TJX Companies (TJX) January 20, 2023, 62.50-strike call on Monday, November 14. Close the position at a limit price within the range of the current market price when you place the order.
- Close the Marriot International (MAR) January 20, 2023, 155-strike put on Monday, November 14. 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:
Berkshire Hathaway (BRKB)Place a limit order to buy the Berkshire Hathaway (BRKB) February 17, 2023 300-strike call at a limit price within range of the current market asked price when you place your order. At the close on Friday, November 11, this option was offered at $23.25. BRKB closed at $309.72 on Friday, November 11.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, December 12, 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 Berkshire Hathaway (BRKB) are breaking out above the 200-day moving average, as well as trendline connecting May and August peaks. The stock has also moved above its year-to-date anchored volume-weighted average price (VWAP) and year-to-date breakeven level. With these levels of support in place, now looks like an excellent opportunity to speculate on a move higher for the equity.
Analysts are skeptical of Berkshire Hathaway stock, leaving plenty ample room for upgrades. In fact, four of the five analysts in coverage still carry a tepid "hold" rating. Meanwhile, the stock broke calls at the 300-strike, which were bought to open, forcing market-makers to buy the security to hedge their positions.
It’s also worth noting implied volatility (IV) ranks in the 15th percentile of readings from the past year. Plus, Berkshire Hathaway stock’s Schaeffer's Volatility Scorecard (SVS) sits at an elevated 84 out of 100, meaning the security has exceeded option traders' volatility expectations during the past year.
Our recommended February 300-strike call has a leverage ratio of 8.96 and will double in value on an 11.7% pop in the underlying shares.
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