Trade Alert: Market Pullback Edition

Another crypto trade and another small cap that should benefit from the market rotation if it continues.

Jul 24, 2024

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Adding More Small Cap Exposure

This one came up in one of my Chartmill screens yesterday, and it happens to be releasing earnings in a couple of weeks. As with yesterday’s small cap, we’re going to use longer dated calls to minimize IV crush and be positioned to benefit if the small cap rally continues into the fall. Some figures on this name:

Technical Rating: 7 (on a scale of 0-10)
Set-Up Rating: 7
Valuation Rating: 7
Piotroski F-Score of 8 (on a scale of 0-to-9)

It beat on top and bottom lines last time it reported earnings. Our options trade will cover this and next quarter’s earnings releases.

Another Crypto Trade

Today’s crypto-related trade is on a vertically integrated Bitcoin miner releasing earnings next week. The maximum upside on this trade is a bit over 200%, and the maximum loss is 100%. I may place a longer term trade on this one post-earnings too.

Details below.

Today’s Small Cap Options Trade

The stock is PetIQ (PETQ 0.00%↑), and the trade is buying the $22.50 strike calls expiring on January 17th, for $2. The max gain on 2 contracts is uncapped, the max loss is ~~$400~~ $500, and the break even is with PETQ at ~~$24.50~~ $25. ~~This trade hasn’t filled yet~~. This trade filled at $2.50 on 7/31/2024.

August 7th Update

PetIQ announced it’s going to be taken private at $31 per share. At that price, the intrinsic value of our $2.50 strike calls would be $8.50, a 240% gain from $2.50.

Today’s Crypto Options Trade

The stock is Marathon Digital (MARA 0.00%↑), and the trade is a vertical spread expiring on August 2nd, buying the $22.50 strike calls and selling the $23.50 strike calls for a net debit of $0.31. This trade filled at $0.31, but you may be able to get it for a little less now (the current midpoint is $0.28).

Exiting These Trades

Assuming the PETQ trade fills, if we get a big move after earnings, I may sell half of these calls; otherwise, I’ll plan to hold them until after until after November’s earnings. For the MARA trade, I’m going to open a GTC order to exit the spread for a net credit of $0.90 or $0.95, and lower that price, if necessary, as we approach expiration.