In The Money with Fidelity Investments: SPX, UUP, NFLX, MU

by Dan July 15, 2020 3:53 pm • InTheMoney• MorningWord

Prior to the open this morning I recorded my weekly In The Money segment with Fidelity Investments:


Macro: Tech stock mania… fever breaking? Banks have a dead cat bounce pre-earnings, no follow-through. The 10-Year U.S. Treasury Yield acts like it wants to make a new low, currently at 60 bps above March 9 all-time closing low of 51 bps. all this could be bad news for stocks this summer as reopening going less than rosy, Nasdaq near all-time highs, and S&P 500 got back to unchanged on year and then failed.

Technical analysts see this chart as bullish, with the 50-day moving average crossing above the 200-day (Golden Cross) and tension building between the uptrend from the March lows and recent resistance::
Screen Shot 2020-07-14 at 12.53.00 PM.png
Trade Idea #1: Short U.S. Dollar via UUP etc… rates are going lower, will put pressure on the dollar, U.S. is a dumpster fire as it relates to our handling of coronavirus and we are not even done with the first wave, our economy will take longer to come back, will require more monetary stimulus, rates will go to zero or below, will be bad for USD.
Trade Idea: UUP ($26) Buy Sept 26 put for 32 cents,
-break-even at 25.68, down 1.23% of the etf price.
Horrible chart:
Screen Shot 2020-07-14 at 3.44.46 PM.png
Trade Idea #2: NFLX HEDGE
NFLX reports Thursday after the close, the options market is implying about a $53 move in either direction or about 10%.
-Stock is up 62% on the year, with a higher market cap than Disney.
-The stock has been on a wild ride over the last week or so, making a new all-time high Monday then reversing 15%…
Longs might consider hedges… Buy Collar
Vs 100 shares at $525, Buy the July 475 – 600 collar for even
-Sell to open 1 July 600 call at $7
-Buy to open 1 July 475 put for $7
Break-even on July (this Friday expiration):
Profits of stock up to 600, called away there, up 14%
Losses of stock down to $475, protected below.
Management: If stock at 600 or higher on Friday afternoon can always buy to cover short call and keep long stock position intact. and if stock is 475 or lower on Friday expiration can always sell long put and stay long the stock.
Screen Shot 2020-07-14 at 4.09.07 PM.png
Look-back: Micron (MU) on July 1st I detailed a bullish strategy in MU, playing or a re-test of its highs towards $60 by Aug expiration:
Bullish Trade Idea: MU ($50.50) Buy Aug 52.50 – 60 call spread for $2
-Buy to open 1 Aug 52.50 call for $2.65
-Sell to open 1 Aug 60 call at 65 cents
Stock does not rally with group which made a new all-time high Monday on the heels of a $21 buyout in the space, this is bad action… with the stock at $49.70, the call spread is worth $1.50… keep a close eye on this, if the underperformance persists it will make sense to cut losses soon, prior to what I would normally say should be a 50% premium stop.