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Weed Sector Capitulation and Accumulation (MJ) What's going on with weed stocks?? There are justifiable claims that some of these companies could still be overvalued. However, despite declining price, On-Balance Volume remains relatively high compared to what we saw during the last major downward swing between March 2019 and March 2020. This could signal accumulation. Additionally, the UO (ultimate oscillator - red) shows a bullish divergence on the daily chart. People who own weed stocks know they need to be patient. The more capital and wealth one has, the easier it is to be patient. This drives accumulation by wealthy entities. I've noticed signs of emotional capitulation by retail weed stock owners. Sentiment is truly awful. Meanwhile, price is just barely sitting on a major horizontal support level. Interestingly, MJ didn't start to truly bounce from the 2020 lows until Bitcoin started to make its rally towards all-time high last fall. Does the weed sector follow once more? Below here, and the next support isn't really until around $10, so I see this as a pretty fearful moment in this sector. If it gets down to those lower levels, perhaps I'll purchase more. I'm not really in any hurry. Even in a financial crisis, weed will not lose demand. In fact, as mental health issues increase, so do coping strategies such as smoking/using weed. The weed industry also involves the stable price of a good. Goods and services won't go anywhere in a financial crisis. Weed is a particular kind of resource, so I think it will trade differently. This is part of my reasoning behind my own accumulation. I guess we'll see! If MJ can bounce hard from these levels, I think it can complete a longer term accumulation process and begin to exit the trading range. This is not financial advice. This is purely for speculative and entertainment purposes. -Victor Cobra
AMEX:MJLong
by VictorCobra
3
Rolling (IRA): MJ October 15th 18 Calls to January 21st... for a .39/contract credit. Comments: The October 15th 18 short calls appeared to be no bid, but stuck an order out there anyway, which got filled. Here, rolling my MJ 18's out to January, since there isn't a December and November isn't paying particularly well at the 18 strike. Current cost basis is now 17.13 (See Post Below) minus .39 or 16.74, so I can potentially look at rolling my calls down to the 17 strike if I want to going forward.
AMEX:MJ
by NaughtyPines
Looking for a bounceDaily RSI at historic Oversold bounce levels. Almost as beat up as the covid crash right now. In the past we have bounced 25%-80%+ when bouncing off this level of Oversold conditions. There is also a gap on the daily now above at these extreme conditions that needs to be filled Also in a buy/support zone on the daily Weekly Oversold 4HR at historic Oversold bounce levels 1HR at historic Oversold bounce levels Daily looking to like a potential falling wedge, at price support/buy zone, at historic oversold levels with now a daily gap above to fill. A lot of confluence and the stars aligning for a good multi-day/weekly bounce out of OS conditions
NASDAQ:CGCLong
by Natestradamus
Rolling (Small Account): MJ October 15th 16 Call to Jan 21st 16... for a .68 credit. Comments: There isn't any November or December monthly yet, so extending duration out to January. My original cost basis was 15.44/share (See Post Below). With this roll, it's now 15.44 - .68 or 14.76, so I could conceivably roll this down to 15 with "my next move" and still be selling above my cost basis. However, we'll wait and see if it continues to implode and go from there. The January 16 short call's value on fill was 1.08.
AMEX:MJ
by NaughtyPines
Opened (Small Account): MJ October 15th 16 Covered Call... for a 15.44 debit. Comments: A small engagement trade in the small account ... . Here, going monied (i.e., the short call is in-the-money versus out-of-the-money), looking for MJ to stay above 16 running through expiry. Post-fill, entered an order to take it off for 15.95 (.05 short of max). That is unlikely to fill until the waning days of the short call contract when extrinsic in approaches nil, but you never know. Metrics: Max Theoretical Loss: 15.44 Max Profit: .56 Return on Capital at Max (as a Function of Max Loss): 3.63% Return on Capital at 50% Max: 1.81%
AMEX:MJLong
by NaughtyPines
Taking Assignment (IRA): MJ SharesComments: Although the shares haven't appeared in my account yet, they will be there by Monday, since MJ finished sub-18.00 at expiry. These started out as August 17th 18 short puts (See Post Below), for which I received a .49/contract credit, so my cost basis in the shares will be the strike price (18.00) minus the credit received (.49) or 17.51/share. Next week, I will proceed to sell calls against my shares, looking to reduce cost basis further. I'll have some work to do, since my cost basis is 17.51 versus 15.95 (where it closed Friday), so the trade is currently 17.51 - 15.95 "in the red" (1.56/contract).
AMEX:MJLong
by NaughtyPines
5
The Week Ahead: ARKK, ARKG, GDXJ, MJ, XBI, XLE, X, CLF, SAVE, FHere's where the premium was at as of Friday's close: Broad Market Exchange-Traded Funds With 30-Day Implied >20%: IWM (1/23) Comments: I have quite a bit of IWM on here, but my order of preference is broad market, then sector, then single name, so am comfortable with adding if we get both weakness and a pop in volatility. IWM/RUT has been fairly rangebound, so it's worthwhile to pop open a chart and see where the bottom of the range is and where any puts you sell are relative to the range between 210 and 235. Sector Exchange-Traded Funds With 30-Day Implied > 35%: ARKK (31/45) ARKG (18/41) GDXJ (0/40) MJ (7/40) XBI (12/38) XLE (2/36) Comments: I've got ARKK, ARKG, and MJ July monthlies on, so I may look to add some GDXJ, even though its implied volatility is literally at the bottom of the 52-week range (which is still afflicted by the 2020 pandemic range, so implied volatility rank/percentile aren't all that helpful here), and it isn't exactly weak relative to where it's been. MJ and XBI are currently the most weak out of the group, so I'm personally leaning toward putting on some more XBI, having taken have a June trade last week. Single Name With 30-Day >50% That Do Not Have Earnings Before Contract Expiry: X (Steel) (9/74) CLF (Basic Materials) (18/73) SAVE (Airlines) (2/55) F (Autos) (19/55) OXY (Oil and Gas) (8/53) SABR (Airlines; Technology) (25/51) MRO (Oil and Gas) (0/50) Comments: Given the slim pickings in the broad market and exchange-traded funds space, I've made a list of options highly liquid single name to potentially play while I wait for broad market or sector volatility to return. This list isn't exhaustive, and I've culled out a ton of meme names that have juicy implied volatility but are more likely to become a headache because they're (ironically) too volatile or they're in a space where they're more likely to blow up in my face (e.g., biopharma research and development, crypto). Pictured here is an X July 16th 22 Short Put (20 delta), paying .74/contract as of Friday close, 3.48% ROC at max/27.6% annualized. As you can see, that play is somewhat close to price action of late, so I'd only put that play on if you're comfortable with potentially taking assignment at 22 and then wheeling it from there. Alternatively, opt for a setup that is consistent with any directional assumption you have as to where U.S. Steel goes from here and that takes advantage of the high implied here.
NYSE:X
by NaughtyPines
The Week Ahead: ARKG, ARKK, MJ, ARKQ, GDXJ, IWM/RUT PremiumHere's what's paying for premium sellers as of Friday's close ... . For those of you not familiar with my general process, my general order of preference is to trade (a) broad market; (b) sector exchange-traded funds; and (c) single name, in that order. If broad market isn't paying, I look at exchange-traded funds, and -- if those aren't paying -- I look at single name. This week, I think that there are opportunities to sell premium in at least sector exchange-traded funds, so I don't feel the need to delve into what single name is paying and haven't bothered to screen single name here. In any event, I first screen out exchange-traded funds* that do not have a 30-day implied volatility of at least 35%. Then, I price out what the 45 day at-the-money short straddle is paying as a function of strike price with the notion being that if the short straddle is paying, then most other premium selling setups I undertake will also be paying, whether it be short puts, short strangles, iron condors/flies, or short verticals/credit spreads. Here, my cut-off is generally a risk premium (credit received)/short straddle ratio of greater than 10%. In light of this, I probably wouldn't bother playing FXI here, even though it has a 30-day implied of 36% and one that is relatively high in the range (at the 63rd percentile) because it just isn't paying enough -- 6.18% as a function of strike price. In comparison, it looks like "The Ark Complex" is paying, even though some expiry availability/liquidity makes the exchange-traded funds in this grouping less than ideal to trade. Exchange-Traded Funds Screened for Options Liquidity and 30-Day Implied >35%: ARKG (Genomics) (60 rank/61 30-Day): June 18th (33 Days)** 77 short straddle, 9.20 at the mid price, 11.95% as a function of strike price, 132.2% annualized. ARKK (Innovation) (52/54): July 2nd (47 Days) 104.5 short straddle, 14.45 at the mid, 13.83% as a function of strike price, 107.4% annualized. MJ (Cannabis) (<1/42): July 2nd (47 Days) 19.5 short straddle, 2.60 at the mid, 13.33% as a function of strike price, 103.5% annualized. ARKQ (Robotics) (51/39): June 18th (33 Days)*** 79.34 short straddle, 6.75 at the mid, 8.51% as a function of strike price, 94.1% annualized. GDXJ (Junior Gold Miners) (7/37): July 2nd (47 Days) 51 short straddle, 5.58 at the mid, 10.94% as a function of strike price, 85.0% annualized. XME (Metals and Mining) (34/37): July 2nd (47 Days) 45 short straddle, 5.95 at the mid, 13.22% as a function of strike price, 102.7% annualized. EWZ (Brazil) (14/37): July 2nd (47 Days) 37 short straddle, 3.50 at the mid, 9.56% as a function of strike price, 74.2% annualized. FXI (China) (63/36): July 2nd (47 Days) 44 short straddle, 2.72 at the mid, 6.18% as a function of strike price, 48.0% annualized. GDX (Gold Miners) (30/35): July 2nd (47 Days) 38 short straddle, 3.53 at the mid, 9.29% as a function of strike price, 72.1% annualized. Broad Market Exchange-Traded Funds with 30-Day >20%: IWM (Russell 2000) (16/27): July 2nd (47 Days) 221 short straddle, 15.68 at the mid, 7.10% as a function of strike price, 55.1% annualized. QQQ (Nasdaq) (14/24): July 2nd (47 Days) 326 short straddle, 21.18 at the mid, 6.50% as a function of strike price, 50.5% annualized. * -- For single name, the cut-off is 50% implied or greater; for broad market, 20% or greater. Broad market just tends to be less volatile than sector, which -- in turn -- tends to be less volatile than single name. ** -- There is currently no weekly contract near 45 days' duration, so using the monthly here. *** -- As with ARKG, there is currently no weekly contract near 45 days, so using the June monthly here.
AMEX:ARKK
by NaughtyPines