Please always note the dates of the articles in the options commentary stream that follows this article. We hope you find this format helpful. Performance is hypothetical and no trading is taking place.

Today, we'll be highlighting our third and fourth options ideas for the month of May 2021, but before we do, we're making a few changes. We'll be "closing" the previously-highlighted ideas of ASML Holding (ASML) (long calls) and Johnson & Johnson (JNJ) (long calls) as "wins" today, while closing the previously-highlighted ideas on the SPDR S&P 500 ETF Trust (SPY) (long puts) and Albemarle Corp. (ALB) (long calls) to preserve the remaining residual premium value. Please let us know if you require further details (see table above).

Our third idea for the month of May 2021 is long call options on PayPal Holdings Inc (PYPL) with a $270 strike price that expire August 20, 2021. The fintech company is well-positioned to capitalize on the ongoing proliferation of e-commerce and only recently has the firm started to seriously monetize its popular peer-to-peer money transfer app Venmo. PayPal also has been steadily bulking up the capabilities of its digital wallet offerings with an eye towards enabling cryptocurrency transactions.

We view PayPal’s capital appreciation upside quite favorably. The top end of our fair value estimate range sits at $334 per share of PYPL, well above where shares of PayPal are trading as of this writing. PayPal’s strong technical performance of late indicates investors are warming up to the firm’s promising growth story, in our view.

During an Investor Day event hosted this past February, PayPal noted that its goal was to roughly double its free cash flow by 2025 using 2020 levels as a baseline. We covered why we are huge fans of PayPal in this article here and our thoughts on its latest earnings report here.

Our fourth options idea for the month of May 2021 is long call options on the Financial Select Sector SPDR Fund ETF (XLF) with a $40 strike price that expire August 20, 2021. Ongoing COVID-19 vaccine distribution efforts supports the outlook for the US economy and the global economy, which in turn supports the outlook for net interest margins (‘NIMs’) at banks and other financial institutions. Credit write-offs have been less aggressive than initially feared at major US banks (something we covered here), aided by major fiscal and monetary stimulus measures enacted at the federal level.

The strong technical performance seen at the XLF ETF of late indicates investors are warming up to the financial sector, too, likely due to the improving outlook for NIMs given the ETF’s exposure to the banking space and interest rates as it concerns the ETF’s exposure to the insurance space. Over 80% of the ETF’s holdings are in companies that operate in the banking, capital markets, and/or insurance industries as of late May 2021. Its largest five holdings are Berkshire Hathaway Inc (BRK.A) (BRK.B), JPMorgan Chase & Co (JPM), Bank of America Corporation (BAC), Wells Fargo & Co (WFC), and Citigroup Inc (C). We view the XLF ETF’s capital appreciation upside quite favorably.

We continue to monitor previously-highlighted ideas closely, and thus far, we've been pleased with the mix of idea generation (as detailed in the table above). We're available for any questions and look forward to generating more ideas in the month of June!

Please always note the dates of the articles in the options commentary stream that follows this article. We hope you find this format helpful. Performance is hypothetical and no trading is taking place.

Please note that with options trading, investors can lose their entire premium. Don't ever trade with money that you can't afford to lose. Valuentum is an investment research publisher and accepts no liability for how readers may choose to utilize the content. By continuing with your additional options commentary membership, you accept our Terms and Conditions. If you do not agree with the Terms and Conditions, you must stop using this service and cancel your additional options commentary membership.

Please always note the dates of the articles in the options commentary stream that follows this article. We hope you find this format helpful. Performance is hypothetical and no trading is taking place.

Starting with our new long call option idea on ASML Holding NV (ASML) with a $700 strike price that expires October 15, 2021, our thesis is underpinned by the incredibly promising demand outlook for semiconductors that is supported by secular tailwinds. ASML Holding makes the lithography systems that are an essential part of the semiconductor production process. These systems are in high demand as fabrication facilities (which use ASML Holding’s equipment to produce chips) are currently unable to keep up with demand from certain industries (especially the auto industry).

ASML Holding is a stellar free cash flow generator with a strong balance sheet and bright growth outlook. Here is what we had to say in our first article covering the company, published back in April 2020 (link here):

"Looking out to the middle of this decade, ASML sees a bright growth trajectory ahead of it. Back in November 2018, ASML issued long-term guidance that noted its annual revenues could grow to €15.0 billion - €24.0 billion by 2025. Under either scenario, ASML would experience strong top-line growth, with that trajectory underpinned by the launch of its next EUV system and more broadly, growing semiconductor demand worldwide...

Automakers around the world are being forced to cut back production due to an ongoing shortage of chips, and semiconductor foundries are running at full capacity to meet demand (which in turn supports the near-term outlook of ASML Holding). In our follow-up article covering ASML Holding published January 2021 (link here), we noted that (lightly edited):

"[ASML Holding’s] operational and financial performance proved to be incredibly resilient during the coronavirus (‘COVID-19’) pandemic. [The firm] reported annual revenue growth at both its ‘net system sales’ and ‘net service and field option sales’ in 2020 which highlighted the firm’s ability to continue meeting strong customer demand even in the face of serious exogenous headwinds. Last year, ASML Holding’s GAAP revenues grew by 18% and its GAAP gross margin surged higher by almost 400 basis points year-over-year... 

We view ASML Holding’s capital appreciation upside potential quite favorably going forward. The company expects its revenues to grow by double-digits this year, according to guidance issued during its fourth quarter of 2020 earnings call. During its first quarter of 2021 earnings call, ASML Holding noted that it continued to view its growth runway through 2025 quite favorably (and management stated the firm would provide an update on that outlook this upcoming September during a planned investor day event).

Pivoting to our second options idea for the month of May 2021, we are highlighting long call options on Domino’s Pizza Inc (DPZ) with a $450 strike price that expire on September 17, 2021. Domino’s is simply a stellar franchise-heavy business with tremendous free cash flow generating abilities and considerable growth potential.

The company has its own delivery operations, meaning it is not dependent on the likes of food delivery firms such as DoorDash Inc (DASH) (unlike many of its competitors). This helps support DPZ franchisee margins. Domino’s also has a top-notch digital presence, which the firm has placed a great emphasis on improving and building up over the past several years. Here is what we had to say in an April 2021 article covering Domino’s (link here) regarding its first quarter of 2021 earnings report (lightly edited):

"On Thursday, April 29, Domino’s reported first-quarter 2021 numbers, and they were remarkable. U.S. same store sales advanced 13.4%, international same store sales leapt 11.8%, as the firm opened 175 stores during the period (36 in the U.S. and 139 internationally). The company is already the largest pizza chain the world (~17% of global market share in quick-service pizza), but store economics are so attractive to entrepreneurs that it’s difficult for franchisees not to continue to expand. Domino’s mostly-franchised (98%) business model is a win-win for investors, too, as capital spending remains light, while operating cash flow keeps coming in the door. Free cash flow was $136.3 million in the first quarter, with capex just ~11% of operating cash flow…

...Domino’s has the right business model for the digital economy, and we expect robust net unit growth and retail sales growth in the mid-to-high single-digit range over the next few years. This asset-light, free-cash-flow generating franchisor is stealing market share hand over fist from its rivals, while it drives robust earnings expansion and buys back its own stock (it has a $1 billion repurchase authorization, as of February 2021)."

Domino’s is well-positioned for the digital economy and has a long growth runway ahead of it, with management seeing room for thousands of additional store locations around the world in the coming years. The attractive unit economics for franchisees supports the company’s promising total store count growth outlook, in our view. We think the capital appreciation upside potential of Domino’s is quite favorable going forward.

That covers our first two option idea considerations for May. We plan to update members on some of our previously-released ideas in the coming days. In the meantime, we're available for any questions. Thank you!

Please always note the dates of the articles in the options commentary stream that follows this article. We hope you find this format helpful. Performance is hypothetical and no trading is taking place.

Please note that with options trading, investors can lose their entire premium. Don't ever trade with money that you can't afford to lose. Valuentum is an investment research publisher and accepts no liability for how readers may choose to utilize the content. By continuing with your additional options commentary membership, you accept our Terms and Conditions. If you do not agree with the Terms and Conditions, you must stop using this service and cancel your additional options commentary membership.

On March 31, we highlighted long call options on Facebook Inc (FB) with a $320 strike price that expire June 18, 2021. At the time of highlight, the contracts had a bid/ask spread of $9.50/$9.65, according to YahooFinance. Today, the contracts are trading at a bid/ask spread of $17.80/$18.00 based on YahooFinance data -- good for another solid "win." Note that we "closed" the previously-highlighted long call options in GOOG and AAPL on April 22 (see email chain that follows) for solid "wins," too. We continue to have success within the strong areas of large cap growth/big cap tech, and we'll be sticking within this space for the third and fourth options ideas for April 2021.

Our third options idea for April is long call options on Amazon Inc (AMZN) with a $4,000 strike price that expire July 16, 2021. Amazon is well-positioned to capitalize on several powerful secular growth tailwinds including the ongoing proliferation of cloud-computing, digital advertising, and e-commerce activities along with upside from its growing logistics business. Shares of Amazon are trading well below the top end of our fair value estimate range as of this writing, which sits at $4,179 per share. The strong technical performance witnessed at shares of AMZN of late indicates investors are increasingly warming up to the company’s promising long-term free cash flow growth story, and we view its capital appreciation upside favorably.

When Amazon reported its first-quarter 2021 earnings report on April 29, the company smashed past consensus top- and bottom-line estimates. Amazon’s ‘Other’ business operating segment, which includes its burgeoning digital advertising business, posted 73% year-over-year sales growth last quarter when excluding foreign currency movements. Its cloud computing business, Amazon Web Services (‘AWS’), posted 32% year-over-year sales growth when excluding foreign currency movements last quarter. Amazon’s e-commerce business also put up strong performance last quarter, indicating the company continues to fire on all cylinders.

Our fourth options idea for the month of April 2021 is long call options on Microsoft Corporation (MSFT) with a $265 strike price that expire July 16, 2021. We continue to be fans of Microsoft as its Azure (cloud-computing offerings), Dynamics 365 (enterprise resource planning and customer relationship management offerings), and other business segments have grown at a brisk pace of late. Its Azure and Dynamics 365 offerings are built on subscription models, creating highly visible revenue streams that result in stronger cash flow profiles. Microsoft has also been pivoting large parts of its consumer-facing offerings and productivity applications toward subscription business models during the past few years with much success.

Shares of Microsoft are trading well below the top end of our fair value estimate range as of this writing, which sits at $317 per share of MSFT. We covered Microsoft’s latest earnings report in this article here. In short, Microsoft smashed past both consensus top- and bottom-line estimates when it reported fiscal third quarter earnings on April 27 (which covered the first quarter of the 2021 calendar year) and continued to churn out gobs of free cash flow. After Microsoft’s latest earnings report was published, some profit taking activities took place (which saw shares of MSFT pull back modestly), but we continue to have a positive view towards its capital appreciation upside going forward. We think Microsoft’s growth runway is simply enormous.

Please always note the dates of the articles in the options commentary stream that follows this article. We hope you find this format helpful. Performance is hypothetical and no trading is taking place.

Please note that with options trading, investors can lose their entire premium. Don't ever trade with money that you can't afford to lose. Valuentum is an investment research publisher and accepts no liability for how readers may choose to utilize the content. By continuing with your additional options commentary membership, you accept our Terms and Conditions. If you do not agree with the Terms and Conditions, you must stop using this service and cancel your additional options commentary membership.

Not all news is somber, however. On February, 27, 2021, we highlighted long call options on Alphabet Inc (GOOG) (GOOGL) Class C shares (ticker GOOG) with a $2,200 strike price that expire May 21, 2021. At the time of highlight, the long call options were trading at a bid/ask spread $60.40-$68.30. According to YahooFinance, they are now trading at a bid/ask spread of $134.40-$136.90, so this turned into a solid "win."

On March 31, we highlighted long call options on Apple Inc (AAPL) with a $130 strike price that expire June 18, 2021. At the time of highlight, the bid/ask spread was approximately $4.00-$4.05. According to YahooFinance, the bid/ask spread for the contracts is now $7.70-$7.80, another nice "win." We've had a lot of success with big cap tech, and we continue to watch our previously highlighted long call option ideas on Facebook (FB) and Albemarle (ALB) very closely -- see article stream that follows for more info.

With that said, the first options idea for the month of April 2021 is long call options on Johnson & Johnson (JNJ) with a strike price of $170 that expire July 16, 2021. Johnson & Johnson reported a stellar first quarter earnings report on April 20. The firm beat both consensus top- and bottom-line estimates, raised its full year guidance for 2021 (as it concerns its expected non-GAAP adjusted operational sales and adjusted operational EPS performance) and pushed through a nice dividend increase as we covered in our recent note here.

Shares of JNJ are on a nice upward climb of late as investors are increasingly warming up to its stellar free cash flow generating abilities and promising growth outlook as demand for the firm’s medical devices continues to recover. We recently updated our valuation model covering Johnson & Johnson and the top end of our fair value estimate range sits at $179 per share. After its latest earnings report, it appears Johnson & Johnson is beginning to converge towards the upper end of our fair value estimate range. We view Johnson & Johnson’s capital appreciation upside quite favorably.

Our second options idea for the month of April 2021 is long call options on Philip Morris International Inc (PM) with a $100 strike price that expire September 17, 2021. As with Johnson & Johnson, Philip Morris also reported a stellar first quarter 2021 earnings report on April 20 that saw Philip Morris beat both consensus top- and bottom-line estimates and raise its full-year non-GAAP adjusted diluted EPS guidance for 2021. Strength at its heated tobacco unit (‘HTU’) offerings were a big reason for Philip Morris’ strong performance last quarter (and its recent guidance boost), a topic we have covered extensively in the past (I, II), as its IQOS offering continues to win over traditional smokers who want to change their smoking habits.

At the end of the first quarter of this year, Philip Morris estimates that its IQOS offering had 19.1 million users with 14.0 million of those users being former smokers who had quit smoking traditional tobacco offerings. For reference, IQOS had 10.4 million users as of the first quarter of 2019, according to the company’s estimates. Pricing strength at Philip Morris’ traditional cigarette offerings (such as its popular Marlboro brand) and growth at its HTU offerings (which represented 13% of the firm’s total volumes in the first quarter of this year) supports the company’s free cash flow growth outlook--as does its relatively modest capital expenditure requirements. In our view, recent technical strength seen at shares of PM has legs, and we view the firm’s capital appreciation upside quite favorably.

Please always note the dates of the articles in the options commentary stream that follows this article. We hope you find this format helpful. Performance is hypothetical and no trading is taking place.

Please note that with options trading, investors can lose their entire premium. Don't ever trade with money that you can't afford to lose. Valuentum is an investment research publisher and accepts no liability for how readers may choose to utilize the content. By continuing with your additional options commentary membership, you accept our Terms and Conditions. If you do not agree with the Terms and Conditions, you must stop using this service and cancel your additional options commentary membership.

Our third options idea for this month is long call options on Apple Inc (AAPL) with a $130 strike price that expire June 18, 2021. As of late March, shares of AAPL are trading well below our fair value estimate of $140 per share (with room for upside as the top end of our fair value estimate range sits at $168 per share). We covered Apple’s latest earnings report here and continue to be impressed with its fortress-like balance sheet, stellar free cash flow generating abilities, and promising growth outlook.

The launch of its first-5G capable smartphone last year (the iPhone 12 series) will provide Apple with a powerful growth catalyst in the near term, though what we are most excited about most is Apple’s ability to grow its high-margin digital services business by leveraging its massive installed hardware base. We covered our thoughts on Apple’s financial tech growth endeavors here. Apple will likely report its fiscal second quarter earnings next month, and we view its near-term capital appreciation potential favorably.

Shifting gears, our fourth options idea for this month is long call options on Facebook Inc (FB) with a $320 strike price that expire June 18, 2021. Facebook is an amazing company with stellar free cash flow generating abilities, a pristine balance sheet, and an extensive growth runway in multiple lucrative arenas (we covered Facebook’s latest earnings report here). Beyond digital advertising, Facebook’s bread-and-butter as things stand today, the social media giant’s e-commerce and payment processing upside is quite intriguing.

Facebook acquired just under a 10% equity stake in India’s Jio Platforms (offers 4G wireless services and operates digital platforms) from Reliance Industries for ~$5.8 billion in cash through a transaction that closed in July 2020. This deal will help set the stage for Facebook to build a nice e-commerce and payment processing business built around its WhatsApp operation with its partners (we covered this potential upside here and here).

Bigger picture, 1) the expected growth in the global middle class and 2) the favorable impact such expansion will have on Facebook’s ability to monetize its international user base (particularly users outside of the US, Canada, and Western Europe) should provide the social media giant with an incredibly powerful tailwind with respect to growing its digital advertising business in the years and decades to come (we covered this dynamic here).

In our view, Facebook is one of the most undervalued equities out there on the basis of its forecasted future discounted free cash flows. Our fair value estimate for Facebook sits at $413 per share with room for upside. Should regulators attempt to break Facebook up into separate companies, we view that as a potential catalyst for driving shares of FB towards their intrinsic value as investors start to evaluate the firm on a sum-of-the-parts basis (we covered out thoughts on this situation here). Facebook is one of our favorite capital appreciation opportunities, and we think call options look attractive at present levels.

Please always note the dates of the articles in the options commentary stream that follows this article. We hope you find this format helpful. Performance is hypothetical and no trading is taking place.

Please note that with options trading, investors can lose their entire premium. Don't ever trade with money that you can't afford to lose. Valuentum is an investment research publisher and accepts no liability for how readers may choose to utilize the content. By continuing with your additional options commentary membership, you accept our Terms and Conditions. If you do not agree with the Terms and Conditions, you must stop using this service and cancel your additional options commentary membership.

First, we'll be letting the put option on Boeing (BA) expire tomorrow, and we're now closing the latest General Motors' (GM) call option idea. Boeing's shares continue to act irrationally exuberant, in our view, while we just came up short on a "win" with GM. Second, we're closing the call option idea on Kraft-Heinz (KHC). According to YahooFinance, the current bid/ask spread for the KHC contracts is $2.07-$2.14 versus $1.23-$1.41 at highlight -- good enough for yet another solid "win." Please refer to the table at the beginning of this note for the option contract information related to these previously-highlighted ideas (their date of highlight, strike price, etc.).

Third, we are releasing our first two options ideas for the month of March 2021.

The first options idea is long put options on the SPDR S&P 500 ETF Trust (SPY) with a $380 strike price that expire July 16, 2021. As of this writing, the S&P 500 index is trading north of the top end of our fair value estimate range (3,530 – 3,920). Our fair value estimate range for the S&P 500 was derived from pre-pandemic consensus 2021 EPS estimates for the S&P 500 (~$197) and a reasonable forward P/E ratio (given the low interest rate environment, a ratio of 18-20 is reasonable, in our view). With key catalysts now in the rear-view mirror, such as the American Rescue Plan Act getting signed into law, we expect investors to engage in some profit taking in the near term.

Public health authorities are steadily working on containing the coronavirus (‘COVID-19’) pandemic, aided by vaccine distribution efforts, and major fiscal stimulus packages (particularly in developed economies) are helping keep the global economy afloat until the public health crisis is brought to an end. The eventual end of the pandemic and the related quarantine and social distancing measures, and the eventual resumption of pre-pandemic activities in earnest (such as air travel, live events, indoor dining at restaurants) should provide the global economy with a nice tailwind. We have taken these factors into account in our fair value estimate range for the S&P 500 index. Over the coming weeks and months, we expect the S&P 500 to pull back within our fair value estimate range as investors lock in some of their profits.

Our second options idea is long call options on Albemarle Corporation (ALB) with a $170 strike price that expire June 18, 2021. Albemarle is a specialty chemicals company with a large lithium and lithium derivates business that the company is aggressively expanding. The WSJ cited data from Benchmark Mineral Intelligence that noted lithium prices had surged by over 60% this year through early-March in part due to growing excitement over electric vehicle (‘EV’) sales. Lithium is a key component in the batteries (lithium-ion batteries) used to power most EVs.

A combination of surging prices, skyrocketing demand, and asset base expansion supports the cash flow growth outlook at Albemarle’s lithium-oriented business operating segment and the company at-large. Albemarle’s two other core business operating segments are focused on catalysts for the refining industry and fire safety products, two areas that should benefit from the world economy emerging from the COVID-19 pandemic. We see room for shares of ALB to move significantly higher in the near term as excitement over its lithium expansion plans begins to build.

Please always note the dates of the articles in the options commentary stream that follows this article. We hope you find this format helpful. Performance is hypothetical and no trading is taking place.

Please note that with options trading, investors can lose their entire premium. Don't ever trade with money that you can't afford to lose. Valuentum is an investment research publisher and accepts no liability for how readers may choose to utilize the content. By continuing with your additional options commentary membership, you accept our Terms and Conditions. If you do not agree with the Terms and Conditions, you must stop using this service and cancel your additional options commentary membership.

1) We are closing the second options idea for January 2021 -- long put options on Tesla (TSLA) with a $500 strike price that expire March 19, 2021. Based on our records, the estimated bid-ask spread at the time of highlight was $7.40-$7.75. Today, these contracts are estimated to be trading at $14.80-$14.95 as of last check -- roughly a double, which is really nice.

2) We are closing the second options idea for February-- long call options on the Energy Select Sector SPDR Fund (XLE) with a $50 strike price that expire June 18, 2021. Based on our records, the estimated bid-ask spread at the time of highlight was $2.34-$2.40 (as of Friday close; the note was released Saturday). Today, several weeks later, the contracts at the time of this writing are trading hands at $5.50-$5.65 -- a comfortable double as well, which I guess many may consider doubly nice.

It has been an honor to be able to highlight some solid options ideas winners, and we hope that you continue to enjoy your membership. We'll have more to say later this week as we update the table that goes into our options idea track record, but we're mighty pleased with how things have been going and wanted to get this note out to you as soon as possible today. Thank you for your membership.

Always our very best.

Please always note the dates of the articles in the options commentary stream that follows this article. We hope you find this format helpful. Performance is hypothetical and no trading is taking place.

Please note that with options trading, investors can lose their entire premium. Don't ever trade with money that you can't afford to lose. Valuentum is an investment research publisher and accepts no liability for how readers may choose to utilize the content. By continuing with your additional options commentary membership, you accept our Terms and Conditions. If you do not agree with the Terms and Conditions, you must stop using this service and cancel your additional options commentary membership.

"Fixed-income investors worldwide – whether pension funds, insurance companies or retirees – face a bleak future." -- Warren Buffett's 2020 Annual Report to Berkshire Shareholders

Dear members:

It would only be fitting that we release the third and fourth options ideas for the month of February 2021 on the Saturday that Warren Buffett has issued the Berkshire Hathaway's 2020 Annual Report (pdf). Just like Berkshire shareholders with their annual letter, one has the whole weekend to ponder these ideas. We release the Exclusive publication generally on the first Saturday of each month for this reason, too. We want our members to have enough time to make the best decision possible.

With that said, the latest installment of Warren Buffett's shareholder letter was filled with the usual wisdom, but he also emphasized what a difficult environment fixed-income investors may be facing in the years ahead. There is no better time to learn the in's and out's of stock analysis--as the returns on index funds may not be good enough to meet goals in the coming years. Read our latest take on the market environment here. We're also hosting a multi-part educational webinar in the coming weeks, too, so please do register for that here to keep your equity analysis skills sharp.

Let's move on to the third and fourth options ideas. Our third options idea is call options on Alphabet Inc (GOOG) (GOOGL) Class C shares (ticker GOOG) with a $2,200 strike price that expire May 21, 2021. Shares of GOOG are trading well below our fair value estimate of $2,493 as of this writing. After smashing past consensus top- and bottom-line estimates when it reported its latest earnings report on February 2, which we covered in this article here, shares of GOOG surged higher and would later close above $2,000 for the first time the next day.

Though we've grown cautious on the broader market environment, we see room for shares of Alphabet to continue marching higher in the near term as its cloud computing business is starting to gain some traction while its bread-and-butter digital advertising business remains rock-solid. Alphabet’s recent efforts to keep a lid on its operating expense growth in certain areas is also a very welcome sign.

Our fourth options idea for February 2021 is call options on Kraft Heinz Co (KHC) with a $40 strike price that expire July 16, 2021. When Kraft Heinz reported its fourth quarter earnings for fiscal 2020 (period ended December 26, 2020) on February 11, the company beat both consensus top- and bottom-line estimates. Looking ahead, management provided promising guidance for organic sales and constant currency adjusted EBITDA performance (non-GAAP financial metrics) for the first quarter of fiscal 2021.

Kraft Heinz is in the middle of a major turnaround, and more recently that strategic pivot appears to be playing out favorably. Divesting non-core businesses, investing more in its brands with promising growth trajectories, generating operational efficiencies across the board with an eye towards cost structure improvements, and eventually returning to consistent organic sales growth is how Kraft Heinz aims to generate shareholder value over the long haul. In fiscal 2020, roughly fourth-fifths of the company’s organic sales came from the US and Canada, two countries with promising economic growth trajectories (supported by fiscal and monetary stimulus measures, along with ongoing COVID-19 vaccine distribution efforts).

Michael Burry (made famous from the book The Big Short), head of Scion Capital, recently invested in Kraft Heinz’s equity, joining Warren Buffett as Berkshire Hathaway Inc (BRK.A) (BRK.B) is a longtime Kraft Heinz shareholder. On February 16, Kraft Heinz provided another promising update on its turnaround during the Consumer Analyst Group of New York (‘CAGNY’) Conference which was apparently well-received by investors given the upward movement in shares of KHC during the following trading days. We see room for shares of KHC to continue moving higher in the near-term, especially as another massive fiscal stimulus package in the US is currently working its way through Congress.

We're available for any questions, and please don't forget to register for the educational webinar here if interested. Thank you.

Please always note the dates of the articles in the options commentary stream that follows this article. We hope you find this format helpful. Performance is hypothetical and no trading is taking place.

Please note that with options trading, investors can lose their entire premium. Don't ever trade with money that you can't afford to lose. Valuentum is an investment research publisher and accepts no liability for how readers may choose to utilize the content. By continuing with your additional options commentary membership, you accept our Terms and Conditions. If you do not agree with the Terms and Conditions, you must stop using this service and cancel your additional options commentary membership.

Please always note the dates of the articles in the options commentary stream that follows this article. We hope you find this format helpful. Performance is hypothetical and no trading is taking place.

Dear members:

Today, we are highlighting our first and second option ideas for the month of February 2021. Our first idea is long call options on Freeport-McMoRan Inc (FCX) with a $40 strike price that expire May 21, 2021. We highlighted Freeport-McMoRan as an options idea in the past (an idea that played out favorably), and we are highlighting the name again today given the incredibly promising outlook for copper prices. Please note Freeport-McMoRan produced ~3.2 billion recoverable pounds of copper in 2020, and that last year, its GAAP operating income more than doubled year-over-year (aided by the tailwind of higher copper prices).

Copper prices on the London Metal Exchange (‘LME’) continue to surge upwards and recently reached their highest level since 2012. Global copper demand remains robust according to research service Metal Miner. Construction and industrial activity rebounded strongly from the depths of the coronavirus (‘COVID-19’) pandemic while demand for consumer electronics surged as many households started working from home.

Furthermore, the COVID-19 pandemic has negatively impacted copper supplies in key producing regions such as Peru, according to S&P Global Platts which is a division of S&P Global Inc (SPGI). Additionally, logistical delays in Chile due to rough seas closing some of its northern ports has significantly limited supply from the two largest copper exporters in the world. Chile is the largest copper exporter by volume followed by Peru. Numerous analysts (cited by a division of Platts in a January 2021 article) forecast that copper prices will advance further this year. We like call options on Freeport-McMoRan to gain exposure to this upside potential.

Our second options idea for February is long call options on the Energy Select Sector SPDR Fund (XLE) with a $50 strike price that expire June 18, 2021. As of this writing, near-term Brent oil futures (international pricing benchmark) are trading ~$60 per barrel, a sharp recovery from the depths of the COVID-19 pandemic. Near-term futures for WTI, America’s key oil pricing benchmark, are now trading ~$60 per barrel, too, as of this writing. The three largest holdings in the XLE ETF are Exxon Mobil Corporation (XOM), Chevron Corporation (CVX), and ConocoPhillips (COP) which combined represented a little over half of the XLE ETF’s total holdings as of February 12.

In our view, the oil & gas industry is recovering now that COVID-19 vaccine distribution activities are well underway worldwide. These activities support the outlook for refined petroleum product demand and ultimately crude oil demand, as households will be able to resume pre-pandemic travel activities once public health authorities bring the COVID-19 pandemic fully under control. Ongoing efforts by the OPEC+ oil cartel to limit global crude oil supplies and a recent winter storm that hit North America (including Texas) quite hard, reportedly resulting in substantial oil supply losses in the US, indicates the supply side of the oil & gas industry is conducive to higher raw energy resources pricing.

Rising raw energy resources pricing combined with a potential recovery in refined petroleum product demand supports the outlook for the various energy companies included in the XLE ETF. Please note that integrated energy majors, such as Exxon Mobil and Chevron, generate an outsized amount of cash flows from their upstream operations, so significant improvements on this front can provide a powerful tailwind to their company-wide performance. ConocoPhillips is considered an upstream “super-independent” after spinning off its downstream (refineries, petrochemical plants) and a good chunk of its midstream (pipelines, storage facilities) operations in 2012.

The XLE ETF has exposure to several upstream independents including EOG Resources Inc (EOG) and Pioneer Natural Resources Company (PXD), which combined represented just under 8% of the ETF’s total holdings as of February 12. Additionally, the XLE ETF has decent exposure to midstream and downstream operators that should see their financial performance recover alongside refined petroleum product demand. Since the start of February 2021, many publicly traded firms in the oil & gas industry have been on an upward swing with the XLE ETF up almost 17% month-to-date as of this writing. We see room for additional upside and like the XLE ETF as a way to gain broad exposure to the recovering oil & gas industry.

On a final note, Berkshire Hathaway Inc (BRK.A) (BRK.B) took a significant stake in Chevron’s equity near the end of last year according to a recent regulatory filing. Please note this is a new position for the conglomerate, run by Warren Buffett, but the decision to invest in Chevron could have been made by one of the company’s investment managers or Mr. Buffett himself. In our view, the news that Berkshire Hathaway is making a ~$4 billion bet on Chevron helps validate the notion that the oil & gas industry is bouncing back.

Please always note the dates of the articles in the options commentary stream that follows this article.

Please note that with options trading, investors can lose their entire premium. Don't ever trade with money that you can't afford to lose. Valuentum is an investment research publisher and accepts no liability for how readers may choose to utilize the content. By continuing with your additional options commentary membership, you accept our Terms and Conditions. If you do not agree with the Terms and Conditions, you must stop using this service and cancel your additional options commentary membership.

Image Shown: Shares of CRISPR Therapeutics (CRSP), which focuses on gene therapies, have surged higher during the past few months. The stock has come in since its recent peak, however, and we think long call options may be worth a look for the ultra- risk-seeking investor. Remember, options trading can result in the loss of the entire options premium (the price of the options contract).

Please always note the dates of the articles in the options commentary stream that follows this article. We hope you find this format helpful. Performance is hypothetical and no trading is taking place.

Though we think the broader equity markets are largely fairly valued at the moment, we are witnessing some highly unusual trading activity in heavily-shorted names. We wrote about this phenomenon in our recent note, "ALERT: Bull Raids, Short Squeezes and Highly Unusual Market Activity." Price-agnostic trading, as defined by trading that does not focus on intrinsic value estimates (e.g. indexing, quant, WallStreetBets, Robinhood, etc), is whipsawing the shares of many companies, and they aren't all small ones either. GameStop (GME), for example, is a $22 billion market-capitalization company and is trading ~130% higher today on no fundamental news.

We're not saying that investors should dabble in options in these ultra-volatile names, but we wanted to provide a list of tickers for your convenience, to look into these ideas further if you're interested in doing so. Note again that options trading is risky, that investors can expose themselves to infinite losses, and the price of volatility for some of their contracts may be very expensive at the moment. Here is the list of companies that we have witnessed unusual trading activity in: GME, FIZZ, DDS, MAC, BBBY, LGND, AMCX, SRG, GOGO, SPWR, AXDX, Other: SPCE, FUBO, KOSS, BB, VLDR, CLVS, OXBR, VIR, PRTS, WKHS, BZUN, BLNK, OSTK, NKLA, YQ, UUU, BYND, PROG, TR, NOK.

With that said, today we are highlighting our third and fourth options ideas for the month of January 2021 with an eye towards two high-flying industry disruptors with promising outlooks. Our first idea is call options on CRISPR Therapeutics (CRSP) with a $220 strike price that expire April 16, 2021. We caution that these options are thinly traded, meaning there may be liquidity concerns. CRISPR focuses on gene therapies using its CRISPR/Cas9 gene editing technology. Gene therapies could potentially treat diseases and other health conditions that current treatments are unable or ineffective at treating/managing.

Medical breakthroughs could lead to CRISPR discovering and developing therapeutic offerings that save lives (which otherwise could not have been saved without gene-editing technology), offering enormous untapped market potential. The company notes that “CRISPR/Cas9 edits genes by precisely cutting DNA and then letting natural DNA repair processes to take over. The system consists of two parts: the Cas9 enzyme and a guide RNA.”

CRISPR established a strategic partnership with Vertex Pharmaceuticals (VRTX) back in October 2015. The duo is currently running clinical trials on CTX001, an “investigational CRISPR/Cas9-based gene-editing therapy” that seeks to treat transfusion-dependent beta thalassemia (‘TDT’) and sickle cell disease (‘SCD’), and initial clinical trial data has been promising.

With earnings season now underway, there is a good chance CRISPR will have positive operational updates to share in the coming weeks. In our view, there is room for shares of CRISPR to continue shifting higher, even after its stellar run during the past few months. CRISPR is at the forefront of pharmaceutical innovation, and investors have clearly shown a preference for companies with enormous growth prospects. We are extremely excited about the potential medical breakthroughs CRISPR, and its partners, may unlock going forward.

Our fourth options idea for the month of January 2021 is a very long-term call option (at least when it comes to options) on Virgin Galactic (SPCE) with a $55 strike price that expires January 20, 2023. Virgin Galactic aims to launch a suborbital space tourist business that will also cater to space research efforts as well. We are quite intrigued by the potential for space tourism, keeping in mind these tickets are priced in the hundreds of thousands of dollars range. On February 25, Virgin Galactic will provide investors with an update on its efforts when it reports fourth quarter and full-year earnings for 2020 after the market close.

Virgin Galactic’s first SpaceShipTwo-class vehicle is dubbed the VSS Unity, and that vessel completed its first supersonic, rocket-powered flight back in April 2018. Testing activity on that vessel continues. Sometime in the first quarter of 2021, Virgin Galactic plans to roll out its second SpaceShipTwo vessel which is part of the company’s long-term strategy to be able to offer almost daily trips to suborbital space (and possibly beyond) down the road.

With ~$0.75 billion in cash and cash equivalents on hand and no debt on the books at the end of September 2020, Virgin Galactic has ample funds to cover its cash flow outspend while it continues to build its operations. After Sir Richard Branson, the founder of Virgin Galactic, flies his first flight up to suborbital space sometime in 2021, Virgin Galactic plans to resume ticket sales. This should generate increased excitement around the name given the potential media coverage of such an event and the potential for a nice boost in ticket reservations. In our view, shares of Virgin Galactic have room to run higher, supported by expectations the firm will have plenty of positive operational updates to share over the coming months.

For members that are new to options, please enjoy the following video analogy from RobinhoodKid on TikTok on how to think about call options! View the video here.

Image Shown: Shares of General Motors have broken out, and we're highlighting the company as an options idea in the context of a "pair trade" consideration in this email.

Please always note the dates of the articles in the options commentary stream that follows this article. We hope you find this format helpful. Performance is hypothetical and no trading is taking place.

Today, we are highlighting our first two options ideas for the month of January 2021, in what can probably be best described as a "pair trade" consideration. As always, please be sure to ask your personal financial advisor if options trading may be right for you. In our additional options commentary feature, we produce ideas for consideration, not recommendations, and only you and your personal financial advisor would know what's best given your own personal circumstances.

With that said, the first part of this "pair trade" consideration is long call options on General Motors (GM) with a $60 strike price that expire March 19, 2021. Shares of GM have been on an upward tear of late (see image above), and we see room for GM to climb even higher. The company’s cost-cutting program has gone a long way in improving its cost structure during times of economic stress. General Motors posted $4.4 billion in EBIT from its ‘North America’ business operating segment during the third quarter of 2020, up significantly year-over-year (even when excluding the hit General Motors took from a prolonged strike in 2019).

Investors are warming up to General Motors’ pivoting towards electric vehicles (‘EVs’), too, as the firm is getting ready to launch its new all-electric HUMMER pickup with sales of the offering expected to begin as early as the fall of this year. General Motors is currently taking reserves for the new EV pickup, and here we would like to highlight that General Motors sold more pickup trucks in the US last year than its domestic rivals. The company’s improving outlook supports its strong technical performance of late.

Additionally, the General Motors-led Cruise business that focuses on autonomous vehicle technology recently secured a strategic partnership with Microsoft (MSFT) that involved a new equity investment round worth north of $2.0 billion (though it appears that this equity raise involves multiple parties including General Motors, Honda [HMC], and “institutional investors” along with Microsoft). Cruise may now be estimated to be worth $30.0 billion, and backing from Microsoft helps validate Cruise’s promising future.

Our second options idea for January 2021--and the other half of this "pair trade" consideration--is long put options on Tesla (TSLA) with a $500 strike price that expire March 19, 2021. To be clear, we view Tesla’s long-term outlook quite favorably, though shares of TSLA have gotten a little bit ahead of themselves, in our view, we expect some profit-taking to pressure its stock price in the near term. In late-2020, Tesla was added to the S&P 500 (SPY) index, and investors aggressively bid up the name before and after the inclusion.

As excitement from that event fades while the market begins to evaluate Tesla’s growing competitive pressures, shares of TSLA may temporarily shift lower in the near term after such an epic run. [Interested members seeking to read more about the EV industry should check out our recent commentary on the issue here.] If shares of TSLA do not slow their breakneck advance, however, we'll look to "sympathy-strength" from the other part of the "pair trade" consideration--the long call options on General Motors--to mitigate weakness in contract value that a continued strong TSLA share price might imply.

Please always note the dates of the articles in the options commentary stream that follows this article.

Always our very best,

The Valuentum Team

www.valuentum.com

Please note that with options trading, investors can lose their entire premium. Don't ever trade with money that you can't afford to lose. Valuentum is an investment research publisher and accepts no liability for how readers may choose to utilize the content. By continuing with your additional options commentary membership, you accept our Terms and Conditions. If you do not agree with the Terms and Conditions, you must stop using this service and cancel your additional options commentary membership.

Please always note the dates of the articles in the options commentary stream that follows this article. We hope you find this format helpful. Performance is hypothetical and no trading is taking place.

Dear members:

Thank you for your continued interest in our additional options commentary.

Today, we're closing a couple of our prior options ideas as we look forward to highlighting four new options ideas for the month of January. On December 18, we released the second options idea for the month of December 2020 -- call options on Penn National Gaming (PENN) with a $100 strike price that expire February 19, 2021. At the time of highlight, per YahooFinance (YF), the bid/ask spread was $8.55/$8.85. Today, the bid/ask spread for these options contracts is $10.55/$10.75 -- good for a hypothetical "gain" of ~19%. Not bad.

On December 29, we released our third options idea for the month of December 2020 -- call options on ARK Innovation ETF (ARKK) with a $145 strike price that expire March 19, 2021. On the date of highlight, shares of the ARK Innovation ETF had a trading range of $120.81-$128.69, according to data from YF. Shares are now trading at $143+ at the time of this writing, just about at the strike price. We're now closing this idea. If you have data for the hypothetical "performance" of this options idea since release (and would like to share), please let us know so we can add the hypothetical outcome to the table. Thank you for your assistance.

As noted previously, thus far, we have been keeping things simple as members of all experience levels become familiar with our additional options commentary feature. All of our options ideas since inception, for example, have been either long call or long put ideas, meaning that the risk of loss with these contracts is generally limited to the premium paid (the price of the contracts).

It's worth emphasizing this very important distinction because if an option investor were to sell/write an uncovered "naked" put option or uncovered "naked" call option, that investor could potentially become exposed to theoretically unlimited losses (with respect to selling/writing "naked" calls, in particular). [Note, we have not highlighted ideas with these characteristics, and we reiterate that options trading can be very risky.] All performance is your own, and please do your own due diligence.

For new members, please be sure to read the OCC's Characteristics and Risks of Standardized Options here. In the coming months, we plan to highlight more advanced ideas, but for now, we continue to keep things simple, as simple has been working great. The number of option idea winners continues to add up! In the coming days, we plan to release our first two option ideas for January, which will be somewhat of a "pair trade" consideration. We hope you continue to find our work insightful and your membership to our service rewarding.

Our latest video on investing, more generally, can be accessed here. We're available for any questions.

Always our very best,

The Valuentum Team

www.valuentum.com

Please note that with options trading, investors can lose their entire premium. Don't ever trade with money that you can't afford to lose. Valuentum is an investment research publisher and accepts no liability for how readers may choose to utilize the content. By continuing with your additional options commentary membership, you accept our Terms and Conditions. If you do not agree with the Terms and Conditions, you must stop using this service and cancel your additional options commentary membership.

Please always note the dates of the articles in the options commentary stream that follows this article. We hope you find this format helpful. Performance is hypothetical and no trading is taking place.

Dear members:

On December 18, 2020, we released our first options idea for the month of December 2020, call options on Freeport-McMoRan Inc (FCX) with a $26 strike price that expire February 19, 2021. We are now closing this idea today, as shown in the image above.

According to data from YahooFinance, at the time of highlight, the relevant FCX call option contracts had a bid/ask spread of $1.57/$1.61. These contracts now have a bid/ask spread of $5.05/$5.20 -- good for a hypothetical gain of ~210%, or what is often called a "three-bagger." Please be sure to read about the limits of hypothetical performance in the article stream that follows.

We are also closing two ideas that didn't quite work out prior to expiration to salvage any residual contract value. These options ideas are put options on Beyond Meat Inc (BYND) with a $120 strike price that expire January 15, 2021 (highlighted November 12), and put options on SolarEdge Technologies Inc (SEDG) with a $210 strike price that expire January 15, 2021 (highlighted November 10).

1) Call options on ARK Innovation ETF (ARKK) with a $145 strike price that expire March 19, 2021 (highlighted December 29).

2) Put options on Boeing Co (BA) with a $175 strike price that expire March 19, 2021 (highlighted December 29).

3) Call options on Penn National Gaming Inc (PENN) with an $100 strike price that expire February 19, 2021 (highlighted December 18).

We look forward to highlighting four new options ideas for the month of January, and we hope you continue to enjoy our additional options commentary. Happy New Year!

Kind regards,

The Valuentum Team

info@valuentum.com

Please note that with options trading, investors can lose their entire premium. Don't ever trade with money that you can't afford to lose. Valuentum is an investment research publisher and accepts no liability for how readers may choose to utilize the content. By continuing with your additional options commentary membership, you accept our Terms and Conditions. If you do not agree with the Terms and Conditions, you must stop using this service and cancel your additional options commentary membership.

Please always note the dates of the articles in the options commentary stream that follows this article. We hope you find this format helpful. Performance is hypothetical and no trading is taking place.

Our third options idea for the month of December 2020 is call options on ARK Innovation ETF (ARKK) with a $145 strike price that expire March 19, 2021. The ETF is heavily weighted towards companies capitalizing on secular growth trends, from cloud computing (~10.1% of the ETF's assets) and e-commerce (~9.8% of the ETF's assets) to gene therapy (~7.5% of the ETF's assets) and energy storage (~3.6% of the ETF's assets).

In our view, industries supported by secular growth tailwinds will continue to perform well going forward, and the ARRK ETF provides broad-based diversified exposure to that upside potential. Shares of ARKK are supported by favorable technical performance of late, too. 

Tesla (11.0%)

Invitae Corp (8.8%)

Square Inc. (6.4%)

Roku Inc. (5.3%)

Crispr Therapeutics AG (4.9%)

Proto Labs (3.5%)

Zillow Group Inc. (3.4%)

2U Inc. (3.1%)

LendingTree Inc. (2.9%)

Teladoc Health (2.9%)

List: A look at the ARKK ETF’s top ten holdings as of September 30, 2020. Image Source: ARK Innovation ETF -- Fact Sheet

Some of the top holdings in the ARKK ETF include electric vehicle (‘EV’) maker Tesla (TSLA), genetic information company Invitae (NVTA), and fintech firm Square (SQ). The future global adoption rate of EVs will be heavily influenced by government actions and the ability for the industry to drive down costs via scale and efficiency gains to provide more affordable offerings to middle-income consumers worldwide.

Gene therapies and utilizing genetic information to improve the efficacy of healthcare services represents another big growth opportunity for firms with an innovative bent. A genetic test can help determine what level of risk a patient has regarding potentially developing a certain disease, significantly improving the ability to treat/manage that situation early on. Gene-based therapeutics are still in their nascent stages, though if successful, these medicines could offer a whole new way to treat a wide variety of diseases and other medical conditions. Companies like Invitae and Crispr Therapeutics (CRSP), another holding in the ARKK ETF, are leading the way in this space.

Fintech companies were quite popular with investors in 2020, and please note these names have benefited from greater e-commerce sales as the global economy continues to pivot towards a “cashless” society. Third-party market research service e-Marketer forecasts that US e-commerce sales growth will come in north of 30% year-over-year in 2020. Data cited by Statista indicates that global e-commerce sales growth is forecasted to hold up incredibly well going forward. Square and another ARKK ETF holding, PayPal (PYPL), are two leaders in the fintech space.

Looking ahead, the ARKK ETF appears well-positioned to keep moving higher as the various holdings within the ETF are leaders in industries with tremendous growth outlooks (with the potential for upward revisions to their forward-looking estimates). Though the ETF's share price has run quite a bit of late, we think call options on the ARKK ETF provide leveraged exposure to significantly favorable long-term secular trends that may see ongoing capital flows as we head into the new year and beyond.

Our fourth options idea for the month of December 2020 is put options on Boeing Co (BA) with a $175 strike price that expire March 19, 2021. As we have noted in the past (link here), Boeing’s financials are absolutely frightening. Though the situation with the 737 MAX may be improving, there are still indications that not all may be well with its workhorse short-haul plane, as recently as December 22 (see here).

Boeing’s near- and medium-term financials and outlook remain very stressed, too, a huge risk in the continued uncertain environment with respect to the COVID-19 pandemic's impact on air travel demand. Here is what we had to say about the aerospace giant's financials in our November 18 note (in italics below):

The reality is that Boeing’s financials are still pretty scary. During the first nine months of 2020, the company burned through an incredible $15.4 billion in free cash flow, even as it cut capital spending by a few hundred million. As of the end of the third quarter of 2020, its total consolidated debt now stands at $61 billion, with total cash and marketable securities of $27.1 billion. This compares to total consolidated debt of $24.7 billion and total cash and marketable securities of $10.9 billion, as of the end of the third quarter of 2019.

Looking ahead, Boeing will likely continue to burn through cash in the near term (i.e. generate negative free cash flow), which will further deteriorate its balance sheet. Boeing is aggressively cutting costs, though in our view, those expense reductions will not be enough to offset higher unit costs (from the plane maker cutting back its production activities) and headwinds stemming from the immense financial stress facing its customer base.

Shares of BA are starting to see their technicals turn against the stock, too, as excitement over the ongoing distribution of COVID-19 vaccines worldwide contend against the realities of Boeing’s dire financial position and lackluster near-term outlook. We think the company's credit quality is "junk" (non investment-grade) at the moment, despite investment-grade ratings at the agencies--and lingering problems with the 737 MAX remain unsettling.

In light of its prior operational missteps that have resulted in the tragic loss of human life, the damage such incidents have done to its brand reputation, its very unhealthy balance sheet, and ongoing free cash flow burn, we view selling pressure on Boeing's shares as likely to build over the coming weeks and months. We don't think Boeing is out of the woods yet by a long shot.

Please note that with options trading, investors can lose their entire premium. Don't ever trade with money that you can't afford to lose. Valuentum is an investment research publisher and accepts no liability for how readers may choose to utilize the content. By continuing with your additional options commentary membership, you accept our Terms and Conditions. If you do not agree with the Terms and Conditions, you must stop using this service and cancel your additional options commentary membership.

Please always note the dates of the articles in the options commentary stream that follows this article. We hope you find this format helpful. Performance is hypothetical and no trading is taking place.

Our first options idea for the month of December 2020 is call options on Freeport-McMoRan Inc (FCX) with a $26 strike price that expire February 19, 2021. Shares of the copper and gold miner have surged upward since late March 2020 due to a recovery in copper prices and sustained strength in gold prices. The high end of our fair value estimate range for Freeport-McMoRan sits at $30 per share, indicating there is room for shares of FCX to run higher still, in our opinion. Let's dig into the details on this idea. 

Freeport-McMoRan recently completed its Lone Star copper leach project in Arizona, and the firm is currently ramping up output at the development according to commentary provided within its third quarter of 2020 earnings press release. Additionally, Freeport-McMoRan is steadily increasing production at its massive Grasberg mining venture in Indonesia (which it owns a sizable economic stake in alongside the Indonesian government). Mining operations at the Grasberg minerals district have transitioned from surface to underground activities during the past few years (the venture completed final open pit mining activities in the fourth quarter of 2019). The Grasberg mining rights are owned by PT-FI which is ~49% owned by Freeport-McMoRan. However, through 2022, Freeport-McMoRan has an approximately 81% economic stake in PT-FI due to past agreements made before the Indonesia government acquired a sizable stake in the venture from Rio Tinto plc (RIO) back in 2018.

As underground production continues to ramp up at the Grasberg minerals district, this should provide a tailwind for Freeport-McMoRan’s copper and gold production while putting downward pressure on its unit costs going forward given the sheer size of the Grasberg mining venture, which primarily produces copper and gold. Freeport-McMoRan’s management team appears quite optimistic that this tailwind will have a powerful impact on the company’s financial performance in 2021+. Here is what the firm had to say in its latest earnings press release regarding its company-wide financial outlook: "With anticipated increases in copper and gold sales volumes and decreases in unit net cash costs, operating cash flows in 2021 are expected to be significantly higher than 2020 levels."

In March 2020, Freeport-McMoRan suspended its dividend to conserve cash in the face of the coronavirus (‘COVID-19’) pandemic. From the end of 2019 to the end of September 2020, the company’s net debt load (inclusive of short-term debt) dropped by $0.2 billion as management prioritized improving Freeport-McMoRan’s balance sheet (net debt, inclusive of short-term debt, stood at $7.6 billion at the end of September 2020). Looking ahead, Freeport-McMoRan intends to recommend to its Board of Directions that the firm should reinitiate its dividend in 2021, according to commentary included in its latest earnings press release. That is largely due to management’s improving confidence in Freeport-McMoRan’s financial trajectory, in our view.

Freeport-McMoRan’s GAAP operating income flipped from a ~$0.1 billion operating loss in the third quarter of 2019 to a ~$0.9 billion operating profit in the third quarter of 2020 as raw materials pricing improvements provided a powerful tailwind to its financial performance. Copper and other metals (such as iron ore) pricing has surged higher this year on the back of an industrial rebound. Expectations for rising electric vehicle (‘EVs’) sales, major investments in utility-scale renewable energy projects (from new power generation facilities to upgraded and expanded electricity transmission and distribution systems), and concerns over supply disruptions due to labor unrest in major copper producing regions have all played a role in bolstering copper prices of late.

Gold prices have moderated somewhat in recent months, though they remain well above levels seen in 2019 due to record monetary and fiscal stimulus measures enacted in major developed economies worldwide. As Freeport-McMoRan’s outlook is getting brighter and brighter, we see room for shares of FCX to continue marching higher over the coming weeks and months. Call options on FCX pass muster for one of our December options ideas.

Our second options idea for the month of December 2020 is call options on Penn National Gaming Inc (PENN) with an $100 strike price that expire February 19, 2021. The company owned, operated or had an economic interest in over 40 casinos and racetracks in the US at the end of 2019, along with a sizable online gambling operation. In February 2020, Penn National Gaming completed its acquisition of a 36% stake in Barstool Sports, a popular sports-oriented website, to bulk up its online sports gambling business. That included acquiring the exclusive rights to use the Barstool brand for Penn National Gaming’s online and retail sport betting offerings and iCasino products.

Though Penn National has a sizable traditional gaming presence (physical casinos and racetracks), it is the firm’s online ambitions that have caught the attention of investors, in our view. As Penn National Gaming continues to push into new markets, its growth runway will continue to get longer and longer. When the firm launched the Barstool Sportsbook mobile app in Pennsylvania this past September, after receiving regulatory approval from the Pennsylvania Gaming Control Board, the app was an instant success according to Penn National Gaming.

Sports betting, specifically online sports betting, is a secular growth market in the US with room for enormous upside after a Supreme Court ruling in 2018 opened the door for states to legalize sports betting should they want to do so. As the high end of our fair value estimate range for Penn National Gaming sits at ~$95 per share, well above where PENN is trading at as of this writing, we see room for additional capital appreciation upside. Penn National Gaming announced in December that it is expanding into Maryland to take advantage of the state recently legalizing sports betting, and moves like these will likely continue to be well-received by investors as the firm’s growth runway grows ever longer. Shares of PENN are supported by stellar technical strength seen of late, too

Please note that with options trading, investors can lose their entire premium. Don't ever trade with money that you can't afford to lose. Valuentum is an investment research publisher and accepts no liability for how readers may choose to utilize the content. By continuing with your additional options commentary membership, you accept our Terms and Conditions. If you do not agree with the Terms and Conditions, you must stop using this service and cancel your additional options commentary membership.

Please always note the dates of the articles in the options commentary stream that follows this article. We hope you find this format helpful. Performance is hypothetical and no trading is taking place.

Please note that in late August we provided options-commentary members a new feature to add two more additional options ideas each month (4 per month, in all) to their existing options commentary membership of 2 per month. If you may have missed the offer, but would still like to add the two more options ideas per month (4 per month, in all), please upgrade here. You'll receive a confirmation registration email from us after completing the upgrade.

Prior to today's "closes," we covered the track record of our options idea generation in this email here, and we are again adding to the excellent track record. Today, we are closing the third and fourth ideas for the month of November -- 1) call options on Booking Holdings (BKNG) with a $2,400 strike price that expire January 15, 2021, and 2) call options on Disney (DIS) with a $150 strike price that expire on March 19, 2021.

As shown in the image above, based on data retrieved from YahooFinance, the bid/ask spread for the Booking Holdings' call option contracts at the time of highlight was $8.80/$11.60. The bid/ask spread is now $16.60/$19.70--good enough for a solid ~40% hypothetical "gain." The bid/ask spread for the Disney call option contracts at the time of highlight was $8.35/$8.70. The bid ask/spread is now $12.45/$12.55--good enough for another solid ~40% hypothetical "gain."

Note that these "closes" today follow two other recent (big) "winners" closed on November 30, namely call options on the First Trust Cloud Computing ETF (SKYY) with $85 strike price and expiration date of January 15, 2021, which was roughly a double, and call options on the iShares Russell 200 Value ETF (IWN) with $120 strike price and expiration date of May 21, 2021, which was roughly a three-bagger. As a financial publisher, please be aware that we are quoting hypothetical "performance."

There are many limitations to measuring hypothetical options-related "gains" and "losses," not the least of which are fast-changing bid/ask spread information and an inevitable timing lag from when we write and publish the note to when readers receive and read the email from us. Our attempt with providing members with our options idea track record is to be as transparent as possible in sharing this information with you. As with all features of Valuentum, we believe transparency is a key positive differentiator of our service. Note, our ideas are not personal recommendations, and not every options idea may be right for you.

Thus far, we have been keeping things simple. All of our options ideas thus far have been either long call or long put ideas, meaning that the risk of loss with these contracts is generally limited to the premium paid (the price of the contracts). Conversely, if an option investor were to sell/write an uncovered "naked" put option or uncovered "naked" call option, that investor could potentially become exposed to theoretically unlimited losses (with respect to selling/writing "naked" calls, in particular). Note, we have not highlighted ideas with these characteristics, and we reiterate that options trading can be very risky.

In the coming months, we plan to highlight more complicated ideas, but for now, we're keeping it simple as we 'rev' up the engines with this new options commentary feature. Simple has been working, too, as the number of option idea winners continue to add up. For new members, please be sure to read the OCC's Characteristics and Risks of Standardized Options here. We hope you continue to enjoy your membership to Valuentum's additional options commentary, and please don't forget to add two more options ideas per month to your membership here -- 4 in all (if you haven't already). Thank you for your continued interest. We're available for any questions.

Please note that with options trading, investors can lose their entire premium. Don't ever trade with money that you can't afford to lose. Valuentum is an investment research publisher and accepts no liability for how readers may choose to utilize the content. By continuing with your additional options commentary membership, you accept our Terms and Conditions. If you do not agree with the Terms and Conditions, you must stop using this service and cancel your additional options commentary membership.

The table above summarizes the track record of our options ideas since inception of the additional options commentary feature of your Valuentum membership. Thus far, the win rates for the additional options commentary ideas have been fantastic, by most measures. The time and volatility element to any options idea makes the idea-selection process much more complicated than simply anticipating a pricing move directionally over a defined period of time, which is difficult to do in and of itself. Nonetheless, many options ideas have been successful--some very much so.

In many cases, prior closed winning ideas, including the two we are closing today, have had sizeable hypothetical estimated "gains," and across both call and put ideas. In a couple other cases, hypothetical estimated "losses" were minimized by closing the options idea prior to expiration, which we showcase as a sign of prudence with respect to our options idea generation. Just a rare few options ideas thus far have expired worthless, which we view very positively given the large percentage of options contracts that traditionally expire worthless. Today, we're adding to this good track record.

On October 26, 2020, we highlighted two options ideas -- 1) call options on the First Trust Cloud Computing ETF (SKYY) with $85 strike price and expiration date of January 15, 2021, and 2) call options on the iShares Russell 200 Value ETF (IWN) with $120 strike price and expiration date of May 21, 2021. We are closing both ideas today.

At the time of highlight for the SKYY contracts on October 26, 2020, the bid/ask spread was $3.20/$3.40. The bid/ask spread for these contracts is now $6.40/$6.70, implying a very nice hypothetical "gain" -- roughly a double. At the time of highlight for the IWN contracts on October 26, 2020, the bid/ask spread was $3.50/$3.90. The bid ask/spread for these contracts is now $11.30/$11.80, also implying a very nice hypothetical "gain" -- roughly a three-bagger. Data according to YahooFinance.

Now on to the third and fourth ideas for the month of November (also pictured in the image above). The third option idea for the month of November 2020 is call options on Booking Holdings Inc (BKNG) with a $2,400 strike price that expire January 15, 2021. Booking Holdings is the world’s leading provider of online travel and related services through portals such as Booking.com, KAYAK, priceline, agoda, Rentalcars.com, and OpenTable. Please note that while we think these options are appealing, they do have a high dollar value, and, as of this writing, cost $8.80/$11.60 based on their current bid/ask spread.

Pfizer Inc (PFE) and BioNTech SE (BNTX) are working together on a potential COVID-19 vaccine, and initial results from their late stage (Phase 3) clinical trials were promising. On November 20, the duo announced that they had submitted their emergency use application to the US Food and Drug Administration (‘FDA’) to begin distributing the vaccine, and furthermore, that 50 million doses could be supplied by the end of 2020 followed by 1.3 billion doses in 2021 (though please note that each patient will likely receive two doses of the vaccine).

Initial results from Moderna Inc’s (MRNA) late stage clinical trials regarding its potential COVID-19 vaccine have also been promising, and the firm is likely to seek emergency authorization soon (if it has not already). Moderna noted it could supply 20 million doses of its potential COVID-19 vaccine by the end of 2020, depending on when it receives the necessary regulatory approvals. The partnership between AstraZeneca Plc (AZN) and the University of Oxford also reported promising initial late stage clinical trial results regarding their potential COVID-19 vaccine. AstraZeneca and Oxford aim to supply their potential COVID-19 vaccine to regions around the globe at a low cost.

At the end of September 2020, Booking Holdings had $11.2 billion in cash and cash equivalents on hand versus $1.0 billion in current convertible debt and $10.8 billion in long-term debt. Its net debt position is relatively modest, and its liquidity position is impressive. The company generated $0.4 billion in free cash flow during the first nine months of 2020, down significantly versus year-ago levels, though we appreciate that Booking Holdings appears able to generate free cash flow in almost any operating environment.

The fourth options idea for the month of November 2020 is call options on The Walt Disney Company (DIS) with a $150 strike price that expire on March 19, 2021. As with Booking Holdings, Disney should be a major beneficiary of the world resuming “normal” activities with an eye towards its immense theme park and resort operations. Disney has had a lot of success of late growing the subscriber base of its various video streaming services (Disney+, EPSN+, various Hulu packages), though its financial performance has been weighed down by widespread weakness elsewhere. We covered Disney’s latest earnings report and impressive paid subscriber growth in this article here.

Should those business operating segments experience a turnaround while Disney’s video streaming business, included in its ‘Direct-to-Consumer & International’ business operating segment, is firing on all cylinders, Disney’s near-term growth outlook would be underpinned by several powerful catalysts. Disney decided to forgo another semi-annual dividend payment in November, though that has not stopped investors from flocking to the name on views of its potential capital appreciation upside. Looking ahead, there is a good chance Disney’s recent technical strength will be sustained, in our view. We like calls on the name as an idea.

Please note that with options trading, investors can lose their entire premium. Don't ever trade with money that you can't afford to lose. Valuentum is an investment research publisher and accepts no liability for how readers may choose to utilize the content. By continuing with your additional options commentary membership, you accept our Terms and Conditions. If you do not agree with the Terms and Conditions, you must stop using this service and cancel your additional options commentary membership.

Image Shown: Shares of Beyond Meat have surged over the past year, though selling pressures have started to build of late.

Our second options idea for the month of November 2020 is put options on Beyond Meat Inc (BYND) with a $120 strike price that expire January 15, 2021. Beyond Meat reported third quarter earnings for fiscal 2020 (period ended September 26, 2020) on November 9 that missed both consensus top- and bottom-line estimates by a mile as its ‘foodservice business’ continues to face significant headwinds due to the ongoing coronavirus (‘COVID-19’) pandemic. In the US, Beyond Meat’s foodservice business reported a 11% year-over-year decline in sales and internationally, its foodservice business reported a 65% year-over-year decline in sales last fiscal quarter.

Quick service restaurants (‘QSRs’) represent about one third of Beyond Meat’s foodservice sales according to recent management commentary, and the remaining two thirds is represented by sales to a wide variety of customers including bars, lodging establishments, and independent restaurants, the kind of entities that have really been hit hard by the pandemic. Pressures on this front will likely continue until global health authorities bring the pandemic under control. Renewed lockdowns in Europe and the potential for renewed lockdowns in the US are likely going to continue representing major hurdles for Beyond Meat in the near term. Please note that Beyond Meat recently bulked up its manufacturing capacity in Europe, in part by acquiring its first manufacturing facility in the region.

Strength at the company’s ‘retail’ segment in both the US and internationally helped grow Beyond Meat’s GAAP revenues by a little under 3% last fiscal quarter. However, for a firm whose stock price has roughly doubled over the past year, that is not strong enough fundamental performance to justify such a sharp increase in its equity valuation in such a short period of time, in our view. Though typically only ~25% of the intrinsic value of an equity comes from its forecasted discounted free cash flows expected to be generated in the year 1 – year 5 period, short-term headwinds combined with weak technicals can lead to significant share price declines in the near term. We see selling pressures continuing to build at shares of Beyond Meat as it attempts to navigate the COVID-19 pandemic.

Please note that with options trading, investors can lose their entire premium. Don't ever trade with money that you can't afford to lose. Valuentum is an investment research publisher and accepts no liability for how readers may choose to utilize the content. By continuing with your additional options commentary membership, you accept our Terms and Conditions. If you do not agree with the Terms and Conditions, you must stop using this service and cancel your additional options commentary membership.

Image Shown: Shares of SolarEdge Technologies Inc rallied ahead of its latest earnings report, before selling off after the report in large part because the firm’s fourth quarter guidance underwhelmed lofty investor expectations. After the US election, shares of SolarEdge began recovering some lost ground, but in our view, we see significant hurdles ahead.

Our first options idea for the month of November 2020 is put options on SolarEdge Technologies Inc (SEDG) with a $210 strike price that expire January 15, 2021. These options look attractive, but they do cost a pretty penny at ~$1,250/$1,310 per contract based on the bid/ask spread at the time of this writing.

For reference, the company operates in the photovoltaic (‘PV’) solar power space by offering a “DC optimized inverter solution” that seeks to “[maximize] power generation while lowering the cost of energy produced by the PV system, for improved return on investment” according to the company’s 2019 Annual Report. SolarEdge has other smart energy solutions as well, and the firm is in the process of launching new offerings though those activities have hit hurdles recently.

SolarEdge reported earnings for the third quarter of 2020 on November 2 that saw its GAAP revenues decline by 18% year-over-year as its GAAP operating income fell by 54% year-over-year. Additionally, SolarEdge’s fourth quarter outlook underwhelmed. Back in the third quarter of 2019, SolarEdge reported $411 million in GAAP revenues. Management is guiding for SolarEdge to generate $345 million - $365 million in revenues during the fourth quarter of 2020, indicating its revenues are expected to continue facing significant headwinds going forward. During SolarEdge’s second quarter of 2020 earnings call, management noted that the coronavirus (‘COVID-19’) pandemic had negatively impacted SolarEdge’s revenues, and those headwinds carried on into the third quarter and apparently will linger on into the fourth quarter (if not longer).

Furthermore, the ongoing pandemic has negatively impacted the launch of SolarEdge’s new offerings. During SolarEdge’s third quarter of 2020 earnings call, management noted that “the global pandemic and associated travel restrictions have impacted our certification and production target dates” and that these factors “will delay the release of our residential battery by several months.” Battery shipment activities are likely to start in early-2021 according to management, instead of this year.

Looking ahead, though it appears that Democrats have retaken control of the White House (legal challenges are ongoing, however), there is a good chance that the 117^th US Congress (the next meeting of Congress) may be split. Two senate races in Georgia are heading to a run-off election to held be on January 5, 2020, a vote that will likely determine which party will control the US Congress (or if it will be a split Congress). It is far from certain that the type of federal incentive packages SolarEdge would benefit from would be able to pass the 117^th US Congress and get signed into law.

Please note that with options trading, investors can lose their entire premium. Don't ever trade with money that you can't afford to lose. Valuentum is an investment research publisher and accepts no liability for how readers may choose to utilize the content. By continuing with your additional options commentary membership, you accept our Terms and Conditions. If you do not agree with the Terms and Conditions, you must stop using this service and cancel your additional options commentary membership.

Image Shown: Shares of Inovio Pharmaceuticals Inc surged higher during the first half of this year, largely due to investors pricing in expectations that this company’s COVID-19 vaccine candidate could prove to be successful. However, shares of Inovio began to sell off in the Summer of 2020 as other companies jumped into the race for a COVID-19 vaccine. After the US FDA suspended clinical trials in late-September, the company’s near- and medium-term outlook turned dour. Very recently, Pfizer Inc and BioNTech SE announced favorable interim data from their Phase 3 clinical trial covering their COVID-19 vaccine candidate, which further pressures Inovio’s near-term outlook. That said, we're running out of time with this option idea, and unfortunately we think it is prudent to close it in favor of future considerations.

Today, November 10, we are closing out one of our October 2020 options ideas, and that is the Inovio Pharmaceuticals Inc (INO) put options idea with a $10 strike price that expire on November 20, 2020. Shares are popping today, and there's just not enough time left, in our view, for this one to work out as planned, unfortunately.

If you recall, shares of Inovio Pharmaceuticals surged higher this year due to optimism over its ability to potentially discover a safe and viable vaccine for the coronavirus (‘COVID-19’), though clinical trials were suspended by the US Food and Drug Administration (‘FDA’) back in late-September. When Inovio reported third quarter earnings for 2020 after the market closed on November 9, the company noted it had responded to questions from the FDA and expected to hear back from the regulator later this month.

Beyond its COVID-19 vaccine candidate, Inovio has various potential treatments in different clinical trial stages, though some of those clinical trials have been delayed by the pandemic. In our view, Inovio’s near-term outlook remains dire as it appears Pfizer Inc (PFE) and BioNTech SE (BNTX) are getting a lot closer to beating Inovio in the race to discover a safe and viable COVID-19 vaccine.

On November 9, Pfizer and BioNTech announced interim data from a Phase 3 clinical trial concerning their COVID-19 vaccine candidate. In the press release Pfizer noted that its COVID-19 “vaccine candidate was found to be more than 90% effective in preventing COVID-19 in participants without evidence of prior SARS-CoV-2 infection in the first interim efficacy analysis.” Though additional observation and data is required from this study before the venture can secure regulatory approval, we applaud Pfizer and BioNTech for their efforts.

Please note that with options trading, investors can lose their entire premium. Don't ever trade with money that you can't afford to lose. Valuentum is an investment research publisher and accepts no liability for how readers may choose to utilize the content. By continuing with your additional options commentary membership, you accept our Terms and Conditions. If you do not agree with the Terms and Conditions, you must stop using this service and cancel your additional options commentary membership.