A R G U S W E E K LY O P T I O N S WAT C H

by Mark Arbeter, CMT Week of May 16, 2022

SHORT-TERM MARKET WRAP

OPTION TRADE OF THE WEEK
Following April’s miserable market performance, and despite Friday’s strong rally, May isn’t
Name......Monster Beverage Corp.
shaping up to be a great month for stocks, at least so far. The S&P 500 took a 9% drubbing
into May, and nine days into the new month the “500” was already off almost 5% (Thursday’s Ticker...................................... MNST
close). For 2022, the benchmark index has declined 836 points or 17.5%. Another bad day might Share Price........................... $88.91
mean we can officially call it a bear market (down 20%). That said, the Nasdaq Composite,
Nasdaq 100 (QQQ), and Russell 2000 (as well as many individual names) have already fallen Recommended Strategy
20%, with a good number down 50% or more.
Trade Type.................BUY CALLS
Doing a rough count of the S&P 500, 168 issues are down 20% just this year, and 54 issues Exp. Date............................6/17/22
on the QQQs are down 20% so far in 2022. Incredibly, or maybe not, 35 stocks in the QQQs Strike Price..........................$90.00
are off 30% or more this year. The Nasdaq and Nasdaq 100 are both down 27% in 2022 (as
of the Thursday close).
Price......................................$3.30
Since the end of 2020, MNST traded
In the S&P 500, only 30% of stocks are above their 200-day simple average. A consistent sideways between the low $80s and
reading below 45% is not healthy and is where a large part of a correction or bear market can $100 for over a year. After rallying
occur. On the S&P 100 (OEX), only 33% of stocks are above their 200-day. More disturbing
to almost $100 early this year, the
is the percentage of the Nasdaq 100 (QQQ) stocks above their 200-day -- which has cratered
shares took a hit, falling right to the
to 14%, and since 2009 has been worse only in 2016, 2018, and 2020. Those three instances
were very tough times for stocks. 200-week moving average at $72.
The shares bounced off the 200-
Trying to find some potentially “decent” data, we note that 12% of stocks on the NYSE Com- week to the high $80s but still were
posite are above their 50-day. For the “500,” it is 15%; for the QQQs, it is 8%; for the S&P below the slightly falling 50-week
MidCap 400 (MDY), it is 10%; and for the S&P SmallCap 600 (SML), it is 11%. While these and declining 200-day averages near
figures can go a bit lower from these already oversold levels, they have a floor at 0%. (A little $88 (until Friday). It looks like the
statistical humor!) stock is completing an inverse head-
and-shoulders (H&S), with the break
With volatility high, selling put options on former leaders seemingly is attractive.
above the neckline at $88 on Friday.
CBOE EQUITY-ONLY PUT/CALL RATIO: CONTRARY INDICATOR We could see a measured move into
the low $100s based on the size of
High put/call (P/C) levels are a sign of fear (bullish from a contrarian view), while low P/C the inverse H&S.
levels are a sign of complacency (bearish from a contrarian view). The trend of P/Cs is more
important than absolute levels. When the intermediate- to longer-term trend of P/Cs is lower,
it is bullish for stocks. When the trend is higher, it is bearish for stocks from an inter-mediate-/longer-term basis.

Last Signal: This P/C is bullish for the short term.

Long-term P/C: The 21-day P/C is in an uptrend and is bearish for the intermediate term.

OEX PUT/CALL RATIO: SMART MONEY INDICATOR

This is a smart money indicator, so it’s best to follow these investors.

Last signal: This P/C is neutral for the short term.

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 ARGUS WEEKLY
OPTIONS WATCH

Argus Covered Call Strategies

The below strategies, in addition to being selected based on proprietary options screening criteria using Argus ratings and target
prices, are screened on two additional characteristics:
* A beta lower than 1.2, indicating moderate- to low-volatility and thus lower likelihood of the underlying security being called; and
* An Argus Financial Strength Score of at least Medium-High, indicating a healthy balance sheet and the tendency of having a stock buyback program
that provides support for the shares to minimize downside during the strike period.

COVERED CALL STRATEGIES - MODERATE BETA, STRONG FINANCIAL STRENGTH

Current Recommended Strike Annualized Financial
Name Ticker Share Price Exp. Date Strike Price Price Return Beta Strength Score
Adobe Inc. ADBE $405.45 6/10/22 $390 $31.10 115.9% 1.19 High
Apple Inc. AAPL $147.11 6/10/22 $140 $10.80 83.7% 0.14 High
Bank of America Corp. BAC $35.17 6/10/22 $35 $1.53 58.4% 1.14 Medium-High
Caterpillar Inc. CAT $204.33 6/10/22 $205 $8.30 69.6% 0.89 Medium-High
Chipotle Mexican Grill CMG $1,318.28 6/10/22 $1,300 $75.80 101.0% 1.10 Medium-High
EBay Inc. EBAY $46.65 6/10/22 $46 $2.47 66.1% 1.17 Medium-High
Home Depot Inc. HD $296.03 6/10/22 $290 $18.50 82.1% 0.92 Medium-High
Mastercard Inc. MA $332.80 6/10/22 $320 $22.95 92.7% 1.09 High
Moderna Inc. MRNA $137.91 6/10/22 $130 $16.95 183.5% 0.99 Medium-High
Nike Inc. NKE $113.01 6/10/22 $113 $5.10 127.1% 1.08 High
S&P Global Inc. SPGI $336.85 6/10/22 $330 $17.30 65.3% 0.94 Medium-High
Unitedhealth Group Inc. UNH $485.40 6/10/22 $480 $19.90 59.8% 0.95 Medium-High
Zoetis Inc. ZTS $165.33 6/10/22 $165 $8.80 59.2% 0.90 Medium-High

Pre-Earnings Call Buying Strategies

The strategies below are screened based on Argus fundamental research analysts having an above-consensus view on near-term
earnings announcements. The call purchase is intended to enable the buyer to take advantage of expected positive price action
following the release of the company’s earnings.

PRE-EARNINGS CALL BUYING STRATEGIES - ARGUS AHEAD OF CONSENSUS

Current Recommended Strike EPS
Name Ticker Share Price Exp. Date Strike Price Price Report Date
Splunk Inc. SPLK $101.80 5/27/22 $100 $7.75 5/25/22
Dicks Sporting Goods Inc. DKS $90.35 5/27/22 $90.00 $6.49 5/25/22
NVIDIA Corp. NVDA $177.06 5/27/22 $170.00 $15.40 5/25/22
Ulta Beauty Inc. ULTA $395.89 5/27/22 $390.00 $21.00 5/26/22

ETF Options Plays

In this table, we provide recommended call options strategies on the S&P 500, as well as other prominent and liquid ETFs.

ETF COVERED CALLS

Current Recommended Strike Annualized
Name Ticker Share Price Exp. Date Strike Price Price Return Risk level
S&P 500 Index SPY $401.72 5/23/22 $400 $7.56 54.0% Low
Russell 2000 IWM $178.07 5/23/22 $176 $4.74 56.2% Low
Invesco Nasdaq QQQ QQQ $301.94 5/23/22 $7.79 $7.79 72.6% Moderate
Financials Sector SPDR XLF $33.53 6/17/22 $33.00 $1.44 29.6% Moderate
Technology Sector SPDR XLK $135.86 6/17/22 $133.00 $7.02 33.7% Moderate
Energy Sector SPDR XLE $80.78 5/27/22 $80.50 $2.52 74.6% Moderate

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