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August 9th Daily Market Note: Most Likely a Range Bound Session ahead of CPI Tomorrow
🕑 Added 2023-08-09 13:38:17 +0000 UTCHi Folks,
I’m out traveling to visit family, so today’s letter is going to be in a pre-market note. Once the group chat is formed, I will be sending pre-market updates such as this every morning for the folks in the Private Group Chat.
Pre-Market Update (8/9)
Good morning. Yesterday we saw a very powerful bounce off the intraday lows in U.S. Markets and this continuation followed through into the Asia session with the Hang Sang in positive territory despite growing fears surrounding deflationary data in Mainland China. Most China Internet names in my coverage were higher, except for chip name Hua Hong which has been subdued since their Shanghai IPO. Traders most likely do not want to make big bets against China Internet ahead of BABA's earnings on 8/10, which may partially explain the latest recovery.
Back in the U.S., Apple is now attempting a modest .5%+ rebound which may stabilize today's intraday action ahead of tomorrow's inflation data. Our Sell Puts Position on Apple with the 145 Strike January 2024 duration is now up approximately 10% from our entry (the put option has gone down 10% for the buyer, which represents a gain of 10% for us the Seller). Apple's current valuation of 29X Forward P/E does not merit a Direct Share position just yet in my view, so I continue to believe it's appropriate to hold Sell Put/Short Put on the name to gain exposure in case Apple stabilizes.
Our TLT Short Put position is also doing okay: up 17% since we discussed in my previous Daily Market Note.
As always, I’m looking for incremental steps to tactically navigate the market, so I will be managing risk if I see the market turn.
<figure>Apple 145 Strike Put - January 2024
</figure><figure>Apple 140 Strike Put - January 2024 and TLT 85 Strike Put - January 2024
</figure>Today is also the 1-year anniversary of Biden’s CHIP Act, so if there are any updates on this funding for the Semiconductors sector, I would rate this news as constructive.
I would characterize today's U.S. session to be likely range bound within .5% (up or down) as there isn't yet an evidence-based reason to make a large trending move before official CPI data is released tomorrow at 830am EST.
Intraday traders who look at 0DTE setups may want to play Strangles rather than look for a directional movement.
Be back with more tomorrow.
If you have friends or fam who are interested in learning to Sell Options or are experienced Investors who want a Strategist on their side to aid with Selling Options, let them know about my work. They will greatly enjoy my research and strategy on this topic.
Have a great day.
-Larry Cheung, CFA
