Weekend Trader Alert
September 11, 2022
Open Positions Update
- The Church & Dwight (CHD) October 21, 2022, 90-strike put was closed after hitting its target profit of +100%. If you have not already done so, please close out of your CHD position at the earliest opportunity.
- Please extend the scheduled time-stop date on the Chevron (CVX) November 18, 2022, 150-strike call to Monday, September 26.
- The Ford Motor (F) January 20, 2023, 13-strike call reaches its time-stop this Monday, September 12. Close the position at a limit price within range of the current market price when you place the order.
The following is this week's recommendation:
Caesars Entertainment Corporation (CZR)Place a limit order to buy the Caesars Entertainment Corporation (CZR) December 16, 2022 45-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 9, this option was offered at $8.40. CZR closed at $48.33 on Friday, September 9.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 10, close the position.
- If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.
Hotel and casino name Caesars Entertainment (CZR) is breaking out of a cup and handle pattern, as well as a long-term downtrend connecting peaks in August, April, and March of 2022, as well as October of 2021. The shares are breaking back above the 80-day moving average, too, which capped price action multiple times earlier this year, and has been a significant trendline in previous long-term bull rallies.
What’s more, Caesars Entertainment stock conquered the 10-week moving average, which is now sloping higher. This has led to long-lasting rallies in the past, except for September 2021. The security surged above significant open interest (OI) at the October 45-strike put as well, which had been suppressing price action of late, but could now act as support. It’s also worth noting CZR typically shakes off broader market seasonality in the form of fall headwinds, finishing September higher 78% of the time, for an average monthly gain of 5.5% over the last 10 years.
An unwinding of pessimism in the options pits could create additional tailwinds for the equity. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), CZR’s 50-day put/call volume ratio ranks higher than 83% of readings from the past 12 months. This means puts are getting picked up at a much faster-than-usual clip.
Meanwhile, short interest is up 7.8% in the last two reporting periods, and now makes up 5.9% of the stock’s available float. Growing short interest after bottoming price action has led to some nice rallies for CZR in the past.
It’s also worth noting the security has frequently exceeded option traders' volatility expectations during the past year, per its Schaeffer's Volatility Scorecard (SVS) of 71 out of 100. Our recommended December 45 call has a leverage ratio of 3.8, and will double in value on a 27.7% rise in the underlying equity.
Most Recent Recommendations
The information contained herein is intended solely for the individual subscribers, is not intended for institutional investment organizations, and is not legal to be rebroadcast. Please click here for full disclaimer details.
Limitation on Schaeffer's Investment Research (SIR) liability: SIR liability, whether in contract, tort, negligence, or otherwise, shall be limited in the aggregate to direct and actual damages not to exceed the fees received by SIR from Subscriber. SIR will not be liable for consequential, incidental, punitive, special, exemplary or indirect damages resulting directly or indirectly from the use of or reliance upon any material provided by SIR. Without limitation, SIR shall not be responsible or liable for any loss or damages related to, either directly or indirectly, (1) any decline in market value or loss of any investment; (2) a subscriber's inability to use or any delay in accessing SIR website or any other source of material provided by SIR; (3) any absence of material on SIR website; (4) SIR failure to deliver or delay in delivering any material or (5) any kind of error in transmission of material. SIR and Subscriber acknowledge that, without limitation, the above-enumerated conditions cannot be the probable result of any breach of any agreement between SIR and Subscriber.