Weekend Trader Alert

November 6, 2022

Open Positions Update

There are no portfolio updates this week.

The following is this week's recommendation:


Marriott International (MAR)

Place a limit order to buy the Marriott International (MAR) January 20, 2023 155-strike put at a limit price within range of the current market asked price when you place your order. At the close on Friday, November 4, this option was offered at $12.70. MAR closed at $148.96 on Friday, November 4.

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 5, 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 Marriott International (MAR) recently stalled at their 200-day moving average, and also breached a confluence of shorter-term trendlines, after their false pre-earnings breakout failure. What’s more, the security failed at its year-to-date anchored weighted average price (VWAP), and slipped below its -10% year-to-date level. Bearing this in mind, we are recommending a new short position on MAR.

What’s more, the security breached the $150 level -- home to peak put open interest that was bought to open -- forcing money managers to short MAR to hedge losing positions. In other words, the options-centric headwinds were made worse by shorts promptly piling on after that key support level fell.


Short interest fell 40% from June to August, to one of its lowest levels in the past several years. Now, it's back on the rise, up 14.8% in the two most recent reporting periods. This could be an emerging headwind, if bearish bettors continue to grow bolder.
 
Additional headwinds could come from a shift in sentiment amongst the brokerage bunch. Of the 11 analysts in coverage, six still call the security a "buy" or better, leaving plenty of room for downgrades going forward as the Federal Reserve attempts to slow down the economy. Our recommended January 2023 155-strike put has a leverage ratio of 6.4 and will double in value on a 13% drop in the underlying shares.


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