Weekend Trader Alert

Weekend Trader Alert

March 12, 2023

Open Positions Update

  • The D.R. Horton (DHI) April 21, 2023, 100-strike put reaches its time-stop this Monday, March 13. Close the position at a limit price within range of the current market price when you place the order.
  • Close the Block (SQ) May 19, 2023, 80-strike call on Monday, March 13. 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:

Chevron (CVX)

Place a limit order to buy the Chevron (CVX) May 19, 2023 165-strike put at a limit price within range of the current market asked price when you place your order. At the close on Friday, March 10, this option was offered at $10.70. CVX closed at $159.67 on Friday, March 10.

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, April 10, 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 Chevron (CVX) are in the midst of a bear flag breakdown on the charts. The stock turned lower after filling its mid-February bear gap, failing to recapture its 200-day trendline, and is also seeing pressure at its descending 20-day moving average. In addition, CVX is pushing below its -10% year-to-date level, peak put open interest, and its one-year volume point of control (VPOC).

Though optimism in the options pits has started to roll over, there is still plenty to unwind, which could provide headwinds. CVX’s 50-day call/put volume ratio of 1.97 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits in the 94th percentile of its annual range.
Now looks like a good time to weigh in with options, too. Chevron stock is seeing attractively priced premiums, per its Schaeffer’s Volatility Index (SVI) of 28%, which ranks in the 24th percentile of its 12-month range.
Our recommended May 165-strike put has a leverage ratio of 8.5, and will double in value on a 10.1% drop in the underlying shares.

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