Porfolio Armor

Stocks Explode Higher On CPI Miss

One example of the extent of Thursday’s “Stunned Into Action” stock market rally is that the struggling theater chain AMC Entertainment Holdings, Inc. (AMC) spiked 18.11% on the day. Fortunately for me, I had sold my AMC puts on Wednesday.

Out of those $AMC puts today at $17.70 for a gain of 142%.

— David Pinsen (@dpinsen) November 9, 2022

Even DWAC Gets A Bid

On Thursday morning, I was still holding puts on Digital World Acquisition Corp. (DWAC), the SPAC trying to merge with the parent company of Trump’s Twitter clone Truth Social, that I had purchased earlier this week. DWAC shares were down about 20% on Wednesday, after Trump opponents blamed the former President for the the weaker-than-expected Election Night results. They were down another 10% in Thursday’s pre-market session, but in another example of the extent of the post-CPI rally, DWAC closed slightly in the green. Nevertheless, I managed to get out of those puts for a gain as well on Thursday.

Out of those $DWAC puts today at $5 for a gain of ~56%.

Still bearish on it, but I don't like betting against Trump, particularly ahead of his big announcement next week.

Who knows what he has planned.

— David Pinsen (@dpinsen) November 10, 2022

Carl Icahn Doesn’t Buy The Rally

In an interview with CNBC on Thursday, Carl Icahn argued that Thursday’s stock surge was a bear market rally (and noted that he was hedged).

Famed investor Carl Icahn said Thursday's relief rally didn't change his negative view on the market, and he believes a recession is still on the horizon. https://t.co/ra6D2ThF8f pic.twitter.com/HAQnNzVeeu

— CNBC (@CNBC) November 10, 2022

Fading The Rally

I shared Icahn’s view of the rally, and used it to buy puts on a handful of stocks that spiked by double digits on Thursday. In the event Icahn and I end up being wrong about this being a bear market rally, I looked for stocks with poor fundamentals that might underperform even in a new bull market. These were the four names, along with their percentage gains on Thursday:

• Riot Blockchain, Inc. (RIOT): +10.62%
• Opendoor Technologies Inc. (OPEN): +26.49%
• Carvana Co. (CVNA): +31.62%
• Redfin Corporation (RDFN): +31.8%

Aside from their weak fundamentals and charts prior to Thursday, they were all in vulnerable industries. RIOT is a bitcoin miner, when crypto is being roiled by the FTX collapse; OPEN and RDFN are in real estate, which remains vulnerable to rising interest rates, even if the Fed tapers its rate hikes; and CVNA deals with used cars, the prices of which sank in Thursdays CPI data.

I’m currently talking with my developers about starting a site (or perhaps modifying this blog) so you can follow these trades in real time. If you’d like an alert when it launches, you can sign up for our occasional email list here.

In any case, consider taking advantage of the current rally to hedge, if you haven’t done so already. Hedging has helped limit declines for bitcoin holders and others this years.

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