Latest news with #SPY
Yahoo
15 hours ago
- Business
- Yahoo
The Saturday Spread: Using Science to Pinpoint Empirically Enticing Trades in WMT, OKTA and RCAT
It's the one question that the financial publication industry consistently refuses to answer: how likely is it that the broadcasted thesis happened because of the signal or undervaluation and not just by random chance? Pretty much all finpub articles offer an investment or trading idea; otherwise, what would be the point of reading the material? If there was no edge to be found, then you should simply put your money into the benchmark S&P 500 SPDR (SPY) and call it a day. But instead, the concept of reading financial analyses is to extract alpha — generating returns that exceed what you'd expect from passive exposure to a broader index. More News from Barchart Netflix Produces Strong Q2 FCF, But NFLX Stock Dips - Is It a Buy Here? AMZN Trade Idea: Capture Gains Without Chasing the Stock AMC Entertainment's Unusual Options Activity Sets Up for a Long Straddle. Should You Bite? Get exclusive insights with the FREE Barchart Brief newsletter. Subscribe now for quick, incisive midday market analysis you won't find anywhere else. But you can't just extract alpha without understanding what you are benchmarking against. And that's the point of the null hypothesis. In the financial realm, the null hypothesis is the assumption that there is no mispricing. Put another way, whether you read the finpub article in question or not, your performance will not deviate statistically from what is expected. By logical deduction, our job as analysts is to reject the null; specifically, that the alternative hypothesis that we present is not just a materialization of random noise but an empirically meaningful signal. To determine this meaningfulness, analysts should run a binomial test, which helps narrow down truly interesting ideas from typical price discovery chaos. However, looking at share prices or their derivatives for recurring patterns represents a gargantuan task. Instead, I prefer compressing (discretizing) price action into market breadth or sequences of accumulative and distributive sessions. By analyzing root demand, we can more easily pinpoint unusual quantitative signals — signals that can point to asymmetric opportunities. Yes, the emphasis on scientific methodologies is a financial red pill. But if we're going to beat the market, we have to think differently. Below are three ideas to mull over this coming week. Walmart (WMT) Let me be blunt: big-box retailer Walmart (WMT) is a truly boring idea. But even industry juggernauts can occasionally broadcast signals that make them very intriguing. For WMT stock, this signal is what I would abbreviate as the 6-4-D sequence: six up weeks, four down weeks, negative trajectory across the 10-week period. Since January 2019, this sequence has materialized 17 times. It's an odd pattern given that the balance of accumulative sessions outweighs distributive, yet the overall trajectory is negative. Still, what's most intriguing is that in 76.47% of cases, the following week's price action results in upside, with a median return of 1%. On Friday, WMT stock closed at $95.05, meaning that if the implications of the 6-4-D sequence pan out, it could hit $96 soon, perhaps in a week. Should the bulls maintain control of the market over the next three to four weeks, a push toward $96.55, perhaps even $97, may be on the cards based on past analogs. The null hypothesis in this case is the baseline probability of WMT stock assuming no unusual mispricing, which is 57.02%. However, the much higher probability of the 6-4-D sequence — which has an empirically intriguing p-value of 0.0819 (implying 91.81% confidence that the signal isn't random) — incentivizes a debit-based options strategy. With that in mind, aggressive speculators may consider the 95/97bull call spread expiring Aug. 8. Barchart Premier members can quickly pinpoint the most viable trades, thereby eliminating much of the guesswork involved in options trading. The above transaction involves buying the $95 call and simultaneously selling the $97 call, for a net debit paid of $93. Should WMT stock rise through the short strike price at expiration, the maximum reward stands at $107, a payout of 115%. Okta (OKTA) Another intriguing idea that popped on the quantitative radar is Oka (OKTA), an identity and access management company. While OKTA stock has been a strong performer, gaining over 21% on a year-to-date basis, it has also been a choppy name. For example, in the trailing month, the security is down 4%. Still, this may open up a trading opportunity. In the past two months, OKTA stock has printed a 4-6-D sequence: four up weeks, six down weeks, negative trajectory. Since January 2019, this particular sequence has occurred 37 times. Ordinarily, it would be associated with pessimism given the greater balance of distributive sessions, along with the negative trajectory. However, in 64.86% of cases, the following week's price action results in upside, with a median return of 4.93%. Should the bulls maintain control for the next three weeks, investors may see an added performance boost of 2.06%. With OKTA closing at $95.43 on Friday, it could potentially be on pace to exceed $102 over the next few weeks. Here, the null hypothesis is a baseline probability of 52.63%. Further, the 4-6-D sequence runs a p-value of only 0.0917. All things considered, the framework incentivizes a debit-based strategy. With that said, speculators may consider the 97.50/100 bull call spread expiring Aug. 15. This trade requires a net debit of $96, with a gargantuan payout of over 160%. Red Cat (RCAT) Defense contractor Red Cat (RCAT) — which specializes in advanced solutions such as reconnaissance drones — is fundamentally intriguing for obvious reasons if you've been keeping pace with geopolitical news. However, it's also risky. RCAT stock is down more than 12% YTD and that's including the 30% lift in the trailing five sessions. If choppiness isn't your thing, you may want to look elsewhere. Here's the thing, though. In the past two months, RCAT stock has printed a 6-4-U sequence: six up weeks, four down weeks, positive trajectory. Since January 2019, this sequence has materialized 44 times. With RCAT, the higher balance of accumulative sessions tends to attract more bullish behavior. Therefore, in 56.82% of cases, the following week's price action results in upside, with a median return of 9.31%. On the surface, that might not seem like a significant edge. However, RCAT's null hypothesis is a baseline probability of 45.32%. Given that the security natively features a negative bias, it's enticing that the 6-4-U sequence tilts the odds firmly in the bulls' favor. This signal has a p-value of 0.1398, which is higher than the rest. However, given the open-system nature of the stock market, it's arguably empirically intriguing. Those who really want to swing for the fences may consider the 11/12 bull call spread expiring Aug. 15. This trade requires a net debit of $40, with a max payout of 150%. On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Business Insider
a day ago
- Business
- Business Insider
‘Today's AI Frenzy Is Worse than 1999's Dot-Com Bubble,' Says Economist
A top economist from Wall Street is warning that AI stock prices may be becoming too high, much like during the dot-com bubble in the late 1990s. Torsten Sløk, chief economist at Apollo Global Management (APO), said on Yahoo Finance's Opening Bid that while AI will likely transform many industries, that doesn't mean investors should buy tech stocks at any price. In a recent note, Sløk shared data showing that the price-to-earnings ratios of the 10 largest companies in the S&P 500—many of which are AI leaders, such as Nvidia (NVDA) and Meta (META) —have now surpassed the extreme levels seen in 1999. Elevate Your Investing Strategy: Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence. Make smarter investment decisions with TipRanks' Smart Investor Picks, delivered to your inbox every week. Sløk explained that this is creating a risky situation where a large part of the market depends on just a few tech giants. He noted that the 10 largest companies now make up almost 40% of the entire S&P 500 (SPY) index. This means that if someone buys the index, thinking they're investing in 500 companies, they're actually heavily exposed to just a few names, especially those tied to AI. Sløk added that the current stock prices of these mega-cap tech companies may not be sustainable since too much of the recent market rally is being driven by excitement and momentum rather than solid fundamentals. Interestingly, analysts at BTIG have similar worries, as they describe the market's sentiment as 'frothy.' Indeed, they pointed to the BUZZ NextGen AI Sentiment Index, which tracks popular AI stocks among retail investors. That index has jumped 45% over the past 16 weeks and is now 29% above its 200-day average. It is worth noting that these levels have not been seen since early 2021, right before speculative tech stocks began to fall. Because of this, BTIG suggested that investors think about shifting to safer areas like utilities or even Chinese tech stocks. Which AI Stock Is the Better Buy? Turning to Wall Street, out of the two stocks mentioned above, analysts think that NVDA stock has more room to run than META, but just barely. In fact, both stocks have almost 6% upside potential from current levels.
Business Insider
a day ago
- Business
- Business Insider
NFLX, MMM, AXP: U.S. Indices Turn Red as Trump Pushes 15% Tariff on European Imports
The leading U.S. indices have turned negative at midday on July 18 on reports that U.S. President Donald Trump is pushing for a blanket 15% tariff on imports from the European Union (EU). Elevate Your Investing Strategy: Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence. Make smarter investment decisions with TipRanks' Smart Investor Picks, delivered to your inbox every week. The blue-chip Dow Jones Industrial Average was down 256 points, or 0.58%, while the benchmark S&P 500 index lost 0.17% after hitting a record high earlier in the trading session, and the technology-heavy Nasdaq Composite lost about 0.10%. Stocks have turned red as Trump demands a minimum tariff of 15%, and perhaps as high as 20%, in any trade deal with Europe. The EU is racing to reach a trade deal with the U.S. ahead of Trump's self-imposed Aug. 1 deadline, when the president has vowed to begin implementing 30% tariffs on the European trading and currency bloc. Tariffs Over Earnings New tariff concerns appear to have taken precedence for investors over bullish economic data and strong corporate earnings. Data released on July 18 found that consumer sentiment in America is steadily improving. This report comes a day after the latest retail sales data showed stronger-than-expected spending on the part of consumers. At the same time, second-quarter financial results continue to impress, with major companies such as Netflix (NFLX), 3M (MMM), and American Express (AXP) topping Wall Street forecasts. Unfortunately, news of the potential tariffs on the European Union is overshadowing the positive news. Is the SPDR S&P 500 ETF Trust a Buy? The SPDR S&P 500 ETF Trust (SPY) has a consensus Moderate Buy rating among 504 Wall Street analysts. That rating is based on 427 Buy, 71 Hold, and six Sell recommendations issued in the last three months. The average SPY price target of $679.22 implies 8.29% upside from current levels.
CNBC
2 days ago
- Business
- CNBC
A simple options strategy that defines investor risk as the S&P 500 reaches new heights
Markets remain in melt-up mode as shorts run for cover. U.S. equities opened higher once again on Friday morning after the S & P 500 and Nasdaq 100 both notched another closing all-time high on Thursday. That is the S & P 500's ninth record close of the year. I believe the S & P 500 will continue to move higher this summer, but I want to use options on SPDR S & P 500 ETF Trust (SPY) to define risk in the event the underinvested and shorts take a break from chasing stocks higher. Another catalyst that has been added into the bull case is the continued lowering inflationary data (or lack of inflation appearing from trade tariffs) coupled with robust initial Q2 earnings reports. Although it's early in the earnings season as the big banks just kicked off the reporting period this week, 51 of the 55 companies that have reported earnings since the start of season this week have beaten consensus analyst EPS estimates. That's a beat rate of 93%, well above the 20-year average beat rate of 63%, Bespoke Investment Group data shows. Optimism abound, but I believe it is also prudent to define risk when investors experience a severe sentiment shift as markets have endured since April. As many strategists tripped over themselves to lower their 2025 S & P 500 price targets subsequent the "liberation day" initial trade tariff sell-off, that highlighted a buying opportunity as the VIX vaulted over 60. Now that these same analysts are readjusting their S & P 500 price targets significantly higher, I have short-term caution on how much more room this melt up may have. However, there is a record amount of money sitting in cash potentially looking to get back in the equity markets and moreover, that is why I prefer to use options to define that risk and exposure. Normally, I would like to utilize a call spread to reduce cost into upside participation. Due to the parabolic move that we have witnessed since the S & P 500 kissed 4,800 in April, I do not want to limit my upside here and I am comfortable risking the (expensive) amount I am paying for this upside call I am buying. Owning the call is more strategic than owning SPY at these levels. I am also using this as a stock replacement strategy as I am closing some of my long SPY position. Buying a SPY call option Bought the Aug. 29 SPY $630 call for $12.90 This call option is a debit of $1,290 This trade was executed when SPY was roughly trading $629 DISCLOSURES: Kilburg is long these $630 calls, long SPY 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
2 days ago
- Business
- Yahoo
Exchange-Traded Funds, Equity Futures Higher Pre-Bell Friday Amid Strong Economic Data
The broad market exchange-traded fund SPDR S&P 500 ETF Trust (SPY) was up 0.1% and the actively trad
