Latest news with #OptionsPlay
CNBC
2 days ago
- Business
- CNBC
Buyers of this retail stock look exhausted. How to trade a downturn in the shares
Walmart (WMT) is facing headwinds with looming tariffs likely to erode profit margins amid an already overstretched valuation. The retail giant, a leader in the defensive sector, trades at a substantial premium, raising concerns about downside risk as global trade tensions mount. With technical rejection and elevated implied volatility (IV) offering attractive premiums, this set-up presents a timely opportunity for bearish exposure to capitalize on WMT's vulnerabilities. Trade Timing The timing for adding bearish exposure to WMT is optimal, as the stock recently rejected its $100 area of resistance. This rejection, combined with negative divergence with momentum suggests buyer exhaustion. We have an immediate downside target of $91, offering an attractive risk-to-reward profile for a short position. Fundamentals WMT trades at a considerable premium to the retail industry despite growth rates and margins that align with the sector, highlighting substantial valuation risks. Forward PE Ratio: 37.4x vs. Industry Average 18x Price to Sales Ratio: 1.2x vs. Industry Average 0.5x Expected EPS Growth: 9% vs. Industry Average 9% Expected Revenue Growth: 4% vs. Industry Average 5% Net Margins: 2.7% vs. Industry Average 2.4% Bearish Thesis Tariff Impact on Margins : Rising tariffs, particularly with potential US-China trade tensions, are likely to increase input costs, squeezing WMT's already thin margins. Limited Growth Upside : WMT's expected EPS and revenue growth (8.97% and 4.19%) are nearly in line with industry averages (9.02% and 4.98%), offering little justification for its premium valuation. The trade To capitalize on WMT's potential downside, I'm selling a July 25, 2025 $98/$103 Call Vertical @ $2.08 Credit. This entails: Selling the July 25, 2025 $98 call @ $3.15 Buying the July 25, 2025 $103 call @ $1.07 The maximum reward is $208 if WMT is below $98 at expiration. The maximum risk is $261 if WMT is above $103 at expiration. The breakeven point for this trade is $100.08. View this Trade with Updated Prices at OptionsPlay This strategy positions you to benefit from WMT's potential downside, leveraging its optimal timing, overvalued fundamentals, and tariff-related margin pressure to profit from selling premium with defined risk. With its premium valuation at risk, this call vertical offers a compelling opportunity to capitalize on a potential decline in WMT stock. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
CNBC
3 days ago
- Business
- CNBC
OptionsPlay's Zhang on McDonald's: Sell put options to pick up stock
Tony Zhang, OptionsPlay chief strategist, joins 'Power Lunch' to discuss the the overall market upside isn't great for McDonald's.
CNBC
21-05-2025
- Business
- CNBC
This Ag play at all-time highs is due for a reversal. How to trade it with options
With agricultural commodity prices facing downward pressure due to oversupply, Deere & Co (DE) is likely to face headwinds as demand for heavy machinery weakens. DE, a leading agricultural equipment manufacturer, has seen its stock rally significantly in recent months, but the recent peak suggests that the uptrend may be losing steam. This creates an opportunity to position for a potential pullback in DE, especially as macroeconomic conditions weigh on the agricultural sector. Trade timing The timing for adding bearish exposure to DE is optimal, as the stock has reached a recent all-time high and is showing signs of exhaustion with bearish divergence on the weekly RSI. While the stock made a higher high, the RSI formed a lower high, indicating weakening momentum and potential for a reversal. This divergence, combined with macro headwinds in the agricultural sector, suggests a pullback is likely, making this an attractive entry point for a bearish trade Fundamentals DE trades at a premium to its industry on a forward P-E basis, which is supported by growth and profitability metrics that exceed the industry average, however, with 6 straight quarters of revenue and EPS declines, there is substantial risk to this elevated valuation. Forward PE Ratio: 28.1x vs. Industry Median 17.8x Expected EPS Growth: 18.5% vs. Industry Average 2.5% Expected Revenue Growth: 7.8% vs. Industry Average 1.2% Net Margin: 13.0% vs. Industry Average 8.9% Bearish thesis Net Sales Decline : DE just posted a 16% YoY decline in sales with every business unit posting double digit declines across the board. Net Income Decline : The most recent quarter just saw a 22% YoY decline in EPS showing the significant challenges in agriculture equipment macroeconomic conditions. Technical Reversal Signal : The bearish divergence on the weekly RSI, with the stock hitting $532.47 while RSI fails to confirm the high, signals a potential reversal and pullback. The trade To capitalize on DE's potential downside, I'm buying a Jun 20, 2025 $530/520 Put Vertical @ $4.48 Debit. This entails: Buying the Jun 20, 2025 $530 put @ $15.73 Selling the Jun 20, 2025 $520 put @ $11.25 The maximum reward is $552 if DE is above $530 at maximum risk is $448 if DE is below $520 at expiration. The breakeven point for this trade is $525.52. View this Trade with Updated Prices at OptionsPlay This strategy positions you to benefit from DE's anticipated pullback, leveraging the bearish RSI divergence, overvaluation concerns, and macro headwinds to profit from a potential decline in this agricultural equipment stock with defined risk. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
CNBC
14-05-2025
- Business
- CNBC
An options play that could reap strong gains in this chip-related stock as trade tensions ease
Lam Research (LRCX) is positioned to capitalize on a cooling trade war, with the U.S. and China reaching a temporary pause and reduction in tariffs. This development alleviates pressures on the semiconductor industry, which has been impacted by supply chain disruptions and uncertain business conditions. LRCX, a key player in semiconductor equipment, stands to benefit from increased demand for chip manufacturing as global tensions ease. With an attractive valuation, strong profitability, and a recent breakout signaling optimal timing for adding bullish exposure in a recovering sector. Trade timing The timing for adding bullish exposure to LRCX is optimal, as the stock recently broke above its bearish trendline resistance around $82, signaling a reversal. This breakout, combined with outperformance in both its sector and the S & P 500, suggests further upside potential to its $113 target, making this an attractive entry point with a strong risk-to-reward profile. Fundamentals LRCX trades at a discount to its industry despite superior profitability, positioning it as an undervalued name with significant upside potential in a recovering semiconductor market. Forward PE ratio: 21.1x vs. industry median of 24.7x Expected EPS growth: 15.4% vs. industry median 16.6% Expected revenue growth: 10.8% vs. industry average 10.9% Net margins: 27.2% vs. industry average 10.4% Bullish thesis Trade war relief : The temporary pause and reduction in tariffs between the U.S. and China have boosted demand for semiconductor equipment and benefiting LRCX's growth outlook. Attractive valuation : LRCX's attractive valuation combined with a strong net margins position it as an undervalued leader in the semiconductor space. Institutional accumulation : LRCX is outperforming both its sector and the S & P 500, reflecting strong momentum and potential institutional accumulation. Options trade To capitalize on LRCX's potential upside, I'm buying a June 27 $85/$95 Call Vertical @ $3.01 Debit. This entails: Buying the June 27 $85 call @ $4.10 Selling the June 27 $95 call @ $1.09 The maximum reward is $699 if LRCX is above $95 at expiration. The maximum risk is $301 if LRCX is below $85 at expiration. The breakeven point for this trade is $88.01. View this Trade with updated prices at OptionsPlay . This strategy positions you to benefit from LRCX's anticipated rally, leveraging its technical breakout, attractive valuation, and the easing of trade war tensions to profit from a high-quality semiconductor name with defined risk. With LRCX outperforming its sector, this call vertical offers a compelling opportunity to capture upside potential in a recovering market. DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
Yahoo
10-04-2025
- Automotive
- Yahoo
Bearish Options Play on Tesla Unveiled by TSLA Skeptic
OptionsPlay analyst Tony Zhang, who's very pessimistic about Tesla (TSLA) and its stock, unveiled a bearish options play on the name today on the Schwab Network. Why Zhang Is Bearish on TSLA Stock Tesla's valuation is "incredibly rich," and the automaker is losing market share to its Chinese competitors in Europe, Asia, and the U.S., Zhang stated. Moreover, the automaker is likely to be hurt by the deterioration of consumer confidence in the U.S., while the performance of its shares will probably be undermined by the stock market's weakness, Zhang contended. Also importantly, the company's Q1 deliveries came in significantly below expectations, the analyst noted. Zhang's Bearish Options Trade The analyst recommended that traders buy May 2 puts with a $255 strike price and sell May 2 puts with a $210 strike price. Traders who use this strategy will pay net premiums of $15 per spread. The Recent Price Action of TSLA Stock In the last month, the shares have fallen 2%, and they are down 38% in the last three months. Over the last year, however, they have jumped 41%. While we acknowledge the potential of TSLA, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than TSLA but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock. READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires Disclosure: None. This article is originally published at Insider Monkey. Sign in to access your portfolio
