Pick #1 – Unity Software Inc.

Unity Software Inc. (U:NYSE)
Price at Preparation: $28.16 (Nov 13, 2023)
Price at Update: $39.36 (Dec 15, 2023)
Gain/Loss: +40%

Update

Unity Software Inc. (U:NYSE) emerged as a top pick following what we perceived as an over-reaction to their Earnings Report, coupled with the buzz around their CEO’s departure and a swiftly resolved pricing hiccup. Referencing the visual chart, the blue vertical line marks the preparation of this pick. The chart vividly illustrates a rapid 40% surge in the stock price, validating the initial opinion. Now positioned at the second target, historically this a challenging level to breach and caution becomes crucial. While securing profits is prudent, manage risk and retain a portion of the position aiming for the final target.

The outlined plan entailed utilizing a Covered Call (CC) strategy, albeit risking profit limitations. Indeed, this strategy may have capped profits for the held CC. At this point, traders find themselves at a profitable crossroads—content with their gains, they can pivot towards researching and planning the next addition to their portfolio or revisit and adjust their strategy.

Pick #2 – LVMH

LVMH Moët Hennessy Louis Vuitton SE (LVMUY:OTC)
Price at Preparation: $155.85 (Nov 15, 2023)
Price at Update: $162.47 (Dec 15, 2023)
Gain/Loss: +4%

Update

The pick of LVMH Moët Hennessy Louis Vuitton SE (LVMUY:OTC) was rooted in the anticipation of robust End of Year Holiday spending, especially after confirming a bounce off the indicated support line showcased in the chart. Merely a month has passed, and the stock has risen by 4%, surpassing the initial target at $159, now enroute to the second target set at $175. Revisiting the original trade plan, it envisioned a potential timeline extending until January 25th, 2024, capitalizing on the run-up to the company’s upcoming Earnings Report, complemented by the potential secondary catalyst of Chinese New Year in February 2024.

Just as in all trades, once targets are met, it’s prudent to lock in some profits while setting sights on the next target. Simultaneously, safeguard against potential downsides by actively managing the trade. Employing a stop-loss strategy stands as one viable method, adjusting as the price ascends. For this scenario, the new stop-loss would align with the first target mentioned above.

Pick #3 – Novo Nordisk

Novo Nordisk A/S (NVO:NYSE)
Price at Preparation: $103.26 (Nov 22, 2023)
Price at Update: $97.10 (Dec 15, 2023)
Gain/Loss: -6%

Update

Diving into the most intricate strategy mapped out, utilizing “Other People’s Money” through Cash Secured Puts (CSP) and Covered Calls (CC) can be complicated. Presently, the Novo Nordisk (NVO:NYSE) stock is down by 6% since we crafted this trade plan, which was the desired goal — a circumstance warranting a revisit to the comprehensive plan outlined in the original article. Upon glancing at the diagram for a visual aid, the blue vertical line marks the preparation of this trade plan. Despite its brief timespan, history has shown to be on our side. While the stock briefly breached the 52-week high, sustaining this level proved too difficult, resulting in a downward slide towards the marked $95 line (1). As per the plan, we are currently navigating part 1 of the plan, leveraging a CSP strategy, capitalizing on premium collection as the stock rebounds from the targeted support line indicated. At this stage, no further intervention is necessary as time chips away at the premium, padding our pockets as the stock price recuperates.

Given the relatively short lifespan of this plan, it’s crucial to bear in mind the discussed risks from the original article, serving as safeguards against losses during a downturn. As of now, optimism prevails—fingers crossed we keep go according to plan!

These trade ideas are merely some examples of what we do. By joining our Theta Bandits Discord community, you unlock more diverse trading methods and ticker discussions as well as further updates to the Top Picks.

Disclaimer: This article is for informational and educational purposes only, not investment advice. We recommend researching and consulting with a financial advisor before making investment decisions. All actions based on this information are at your own risk.

What they do

Novo Nordisk A/S is a global healthcare company engaged in diabetes care. The Company is also engaged in the discovery, development, manufacturing and marketing of pharmaceutical products. The Company operates through two business segments: diabetes and obesity care, and biopharmaceuticals. The Company’s diabetes and obesity care segment covers insulin, GLP-1, other protein-related products, such as glucagon, protein-related delivery systems and needles, and oral anti-diabetic drugs. The Company’s biopharmaceuticals segment covers the therapy areas of hemophilia care, growth hormone therapy and hormone replacement therapy. The Company is most recently known for Ozempic and Wegovy, however also offers Saxenda to treat obesity. It offers a range of products, including NovoLog/NovoRapid; NovoLog Mix/NovoMix; Prandin/NovoNorm; NovoSeven; Norditropin, and Vagifem.

Opinion

Welcome to this week’s exploration—a labyrinth of intricacies promising potential. Picture this: Ozempic struts its stuff while NVO stretches its wings, signaling a probable ascent. Let’s unravel our roadmap possibilities to maneuver through this landscape of this trade shrewdly. Here at Theta Bandits, our playbook dances around “Other People’s Money” (OPM), skillfully wielding available tools. Below, we sketch out our tactical blueprint, considering the rhythmic dance of technical analysis embedded in the accompanying stock chart. Our game plan involves navigating potential swings both up and down, sculpting a flexible strategy to seize those moves. Remember, our North Star remains pocketing profits while paring down potential losses.

Plan

Let’s dive into this strategy by first checking out the diagram below for a visual roadmap. Even though the chart might seem to be in a sideways shuffle, those bright green higher lows hint at something exciting—a potential upward swing. On the flip side, the blue markings tell us we’re toeing the line of a tough nut to crack—the 52-week highs, a formidable resistance point. History tells us that breaking through might not happen straight away; chances are, the stock might briefly cross or bounce off this barrier, possibly dipping to those dashed orange support lines. Think of those orange lines as safety nets—if the stock breaks through, it’s likely to drop to the next support before gearing up for another shot at that resistance to the upside. Now, the stock’s eyeing a 1-year price target of $110, which is a modest 6.5% bump from current levels. The big question: how can we squeeze more juice out of this lemon?

Part 1:

Here’s the entry plan: a Cash Secured Put (CSP) option, which is selling a single contract (100 shares equivalent) at either $95 (1) or $92.5 (2) strike prices, depending on the expected retracement. These strike prices align with potential support zones, where we anticipate a bounce. Our main gig here? Raking in those premiums. In a dreamy scenario where the stock glides north, we skip owning the stock equity, happily repeating the premium collection. But, in the nightmare scenario of the stock plunging below the strike price, we’ll get ready to cough up $9,500 (1) or $9,250 (2) for those assigned shares depending on our CSP strike.

Part 2:

Alright, here’s the follow-up act: once those shares are in our lap (thanks to Part 1), it’s time for a Covered Call (CC) option show. This move is all about balance—balancing premiums with the possibility of the stock skyrocketing. Given the pesky resistance at $105 (let’s pretend), we’re eyeing a strike price at that level. Setting the expiry around earnings report periods could spice things up nicely. If the stock flexes and lands ‘In The Money’ (ITM) above the strike price, we cash out selling those shares at $105 a pop plus the premium for a nice profit. But if it hangs ‘Out The Money’ (OTM) below that $105 strike price, we pocket the premium and get ready for another round of selling.

Part 3:

Now, about risk—every trader’s best frenemy. That orange line number 3 on the diagram? That’s a milestone. Cross it, and we’re likely breaking the rhythm of those uplifting higher lows. Translation: a probable nosedive. Here’s the drill at this point: scoop back that covered call option and offload the shares pronto to curtail the losses. Yeah, we might take a hit selling the stock, but hey, fingers crossed that the CSP and CC premium collection kept us floating around the break-even mark or better.

Remember, folks, trading’s a rollercoaster of risks. Strap on your seatbelts, aim for the stars, but always keep a safety net handy to cushion any bumpy rides to limit the losses while chasing those gains!

RISKS

The truth is that trading and risk go hand in hand. This trade is using a wide variety of concepts – possibly unfamiliar territory for some. Part 3 of our plan does map out some safeguards, but this trade is potentially capital intensive so please dissect, review and be comfortable with the plan before taking any action.  There is no shame in flexing those trading muscles in a “paper account” – consider it a practice arena – before putting any hard-earned money to work.

Disclaimer: This article is for informational and educational purposes only, not investment advice. We recommend researching and consulting with a financial advisor before making investment decisions. All actions based on this information are at your own risk.