To The Moon

The Federal Reserve left interest rates unchanged on Wednesday but signaled it could raise them again if it needs to take further steps to curb inflation. The S&P fell 2.9 percent for the week, its worst week since March. Volatility rebounded from its lows, with the VIX up 15.8% in a single day.

Among the $Goodyear(GT)$ option transactions, a single sell put option sale volume reached 300,000 lots. In the $TAL Education Group(TAL)$ option trade, monthly puts were sold again, with an annualized yield of 18.36%.

Week's put strategy picks

1 $Goodyear(GT)$

sell $GT 20240419 9.0 PUT$

Exercise price: 9; Expiration date: April 19, 2024; Volume: 300,000 lots; Total turnover: 7.5 million; Stock price at transaction: $12.98;

Annualized return: 4.95%

Company introduction:

Goodyear Tire & Rubber Company is one of the world's leading tire manufacturers. The company is one of the world's largest operators of commercial truck service and tire retreading centers, and its primary business is the development, manufacture, distribution and retail of tires and related products and services worldwide.

Recent news:

Goodyear Tire & Rubber Co said on September 22 that under its Asia-Pacific business rationalization plan, the company will shift its operating model to a third-party distribution and retail model, and plans to cut 700 jobs and sell several retail stores. The move is expected to boost the unit's operating income by about $50 million to $55 million in 2025, primarily by reducing selling, administrative and general expenses, Goodyear said. And improve profitability in Australia and New Zealand.

Strategy analysis:

In the year of the outbreak of the new coronavirus, GT's stock price once fell to a minimum of 4.09, and in 2022, the stock price lingered at a low level but never fell below 9.5. The company's operating cash flow was down 50 percent from last year, and the sale of stores helped improve operations. As the largest number of stock options seller orders this year, institutions seem to have a lot of confidence in the bottom of GT company.

2 $TAL Education Group(TAL)$

sell $TAL 20231117 6.0 PUT$

Exercise price: 6; Expiration date: November 17th; Volume: 12,300; Total turnover: 269,900; Stock price at transaction: $7.02;

Annualized return: 18.36%

Company introduction:

Good Future Group is a technology education company with smart education and open platform as the main body, serving public education worldwide, helping private education, and exploring new models of future education.

Recent news:

Soochow Securities released a research report saying that since the "double reduction", disciplinary training institutions in the compulsory education stage have been greatly impacted, and industry companies actively seek business transformation, including non-disciplinary quality training, learning hardware services, overseas study services, adult vocational training, live e-commerce, etc., after 2 years of business adjustment, The bank sees that the head company in the industry has a relatively clear future business development direction, from the level of various operating and financial data also reflects the bottom has passed, the inflection point has dropped to, it is recommended to pay attention to $New Oriental Education & Technology(EDU)$ , $TAL Education Group(TAL)$ and so on.

In addition, after the introduction of the "double reduction" policy, the demand for non-disciplinary training business has increased, and the policy environment is relatively relaxed, which has led to the continuous growth of the quality education market, and iResearch expects the market size to reach 111.4 billion US dollars in 2023. Since 2022, the study abroad service market has rebounded after the entry restrictions of the main destination countries have been lifted, and with the increasingly fierce competition for domestic postgraduate entrance exams, the number of Chinese students studying abroad is expected to maintain a certain growth in the future.

Strategy analysis:

TAl shares are trending steadily. Sell put orders at a strike price of $6 have been placed for three consecutive months, presumably a long-term strategy by the same institution.

3 $IBM(IBM)$

sell $IBM 20231215 135.0 PUT$

Exercise price: 135; Expiration date: December 15th; Volume: 8583; Total turnover: 1.27 million; Stock price at transaction: $147.6;

Annualized return: 4.8%

Company introduction:

IBM creates value for its customers through integrated solutions and products that leverage deep expertise in data, information technology, industry and business processes, and a broad ecosystem of partners and alliances. IBM solutions often provide customers with new capabilities that create value, transform their business and help them interact with customers and employees in new ways.

Recent news:

RBC Capital Markets began coverage of the stock with an "outperform" rating and a price target of $188, which implies a 28% upside from the stock's closing price on the 19th. Analyst Matthew Swanson said the tech giant's software business is "misunderstood and undervalued," especially when it comes to artificial intelligence and spending optimization. He also mentioned IBM's "unique role" in enabling hybrid cloud environments - combining public, private and on-premises infrastructure.

He added that while 75 percent of IBM's revenue now comes from software and consulting businesses, investors still view the company "primarily from a hardware and services perspective." Swanson said the company was trading in line with its consulting peers, but at a "significant discount" to its software peers.

Strategy analysis:

Since 2017, IBM's stock price has fluctuated between 115 and 152, and the current stock price has once again reached the top of the range. The institution selects the 20-week moving average as the strike price for the put option.

4 $Analog Devices(ADI)$

sell $ADI 20231117 160.0 PUT$

Exercise price: 160; Expiration date: November 17th; Volume: 10,000 lots; Total turnover: 1.71 million; Stock price at transaction: $175.95;

Annualized return: 7.26%

Company introduction:

AnalogDevices, Inc. is a global leader in high-performance simulation technology that solves customers' most complex engineering challenges. The company designs, manufactures, tests, and markets a broad portfolio of solutions, including integrated circuits (ics), software, and subsystems utilizing high-performance analog, mixed-signal, and digital signal processing technologies.

Recent news:

On Sept. 19, Vivek Jain, executive vice president of global operations and technology at Analog Devices, sold $3.9 million in stock, making the largest insider trade in the past 12 months. Last year, Analog Devices insiders sold more than they bought, with an average transaction price of about $182.

Strategy analysis:

The strike price of the put option is at the bottom support level.

5 $Advanced Micro Devices(AMD)$

sell $AMD 20250620 70.0 PUT$

Exercise price: 70; Expiration date: June 20, 2025; Volume: 1000; Total turnover: 795,000; Stock price at transaction: $96.66;

Annualized return: 4.77%

Company introduction:

Advanced Micro Devices, Inc. is a global semiconductor manufacturer with facilities around the world. In the global semiconductor industry, the company primarily provides: x86 microprocessors for the commercial and consumer markets; Embedded microprocessors for commercial and consumer markets; Desktop and laptop chipsets; Professional workstations and servers; Video graphics and multimedia products for desktop and laptop computers, including domestic media computers, professional gaming workstations and servers and related technologies.

Recent news:

AMD shares fall after Fed rate hike.

Strategy analysis:

In the recent semiconductor correction, AMD shares fell back to the 200-day moving average, and institutions placed the exercise price below the 250-week moving average. The maturity selection reflects that this is a long-term transaction and does not represent a recent trend.

6 $Citigroup(C)$

sell $C 20231103 38.0 PUT$

Exercise price: 38; Expiration date: Nov 3; Volume: 6050; Total turnover: 27; Stock price at transaction: 41.73;

Annualized return: 13.49%

Company introduction:

Citigroup is a global diversified financial services holding company that provides consumers, corporations, governments and institutions with a broad range of financial products and services, including retail banking and credit, corporate and investment banking, securities brokerage, trading services and wealth management.

Recent news:

Bank stocks fell after the Fed rate hike.

Strategy analysis:

Institutions expect the banking sector to fall again before the next rate hike is unlikely. Exercise price selected March 2020 closing price.

Overview of selling put options

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Strategy introduction:

Selling a put option is a common option trading strategy.

A put option, as its name suggests, represents the right to short a stock. A trader buying a put option usually indicates a bearish trend in the stock, while selling a put option indicates that the trader wants to buy the stock at a certain strike price, or believes that the stock price will not fall below a certain strike price for a certain period of time, thereby earning a premium.

Sell the put option to receive the right to profit, and assume the obligation to exercise the right to buy the stock at a future agreed time.

Strategy advantages: sell to get the right fee, when the option expires, when the stock price is higher than or equal to the exercise price, there is no need to accept the positive stock.

Strategy disadvantages: When the option expires, when the stock price trend is not as expected and falls below the exercise price, it is still necessary to buy the positive shares at the exercise price, that is, to buy the shares above the positive share price.

Example:

When the stock price of Coca-Cola was 40 in that year, Buffett sold 5 million shares with an exercise price of 35 put, and obtained a royalty of $1.50 per share (that is, $750). If the expiration stock price was not lower than 35, the put would be cancelled and Buffett would earn 7.5 million. If the expiration stock price reached 35, Buffett would buy 5 million shares of Coca-Cola according to 35. And since the first 1.5 earned, the equivalent of the cost per share is only 33.5.