• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing

If Trade Becomes a Negative, Look Out Below for U.S.-Listed Chinese Stocks

A report indicated that Trump Administration officials are seeking ways to limit capital flows from U.S. investors into China.
By JIM COLLINS
Sep 27, 2019 | 01:41 PM EDT
Stocks quotes in this article: NIO, BABA, IQ, HUYA, BIDU, LK, MU, ROKU, BYND, TSLA, MCD

Following on my column yesterday for RM, I re-scanned barchart.com's list of the U.S.-listed options contracts with the highest implied volatility (IVs) this morning. The more things change the more they stay the same. Contracts on Chinese BEV-maker NIO (NIO) occupied seven of the top 15 slots on barchart's list this morning. As I mentioned in yesterday's column, NIO management's decision to cancel a scheduled conference call following a disastrous second quarter earnings release has put the options market vigilantes on high alert. In fact, six of the seven NIO contracts on barchart's list are puts.

What is also not helping NIO, as well as Alibaba (BABA) , iQIYI (IQ) , Huya (HUYA) , Baidu (BIDU) , Luckin Coffee (LK) , and other names, is this morning's report in Bloomberg News that indicated that Trump Administration officials are seeking ways to limit capital flows from U.S. investors into China. While the Bloomberg piece was unsourced and short of details - another example of the shoddy reporting that is so common in the mainstream media - it did move the markets.

So, that's an example of the flexibility needed to trade options. If one is writing contracts, one always needs to have dry powder for new positions and to support the aggressive margin requirements needed for naked positions. If trade becomes a negative, then it will become "look out below" for U.S.-listed Chinese stocks. Alibaba lost $26 billion in market capitalization in the five minute period encompassing the posting of the Bloomberg report, and if that's not volatility, I don't know what is.

So, macro rules the micro, but Micron's (MU) terrible stock price performance - down about 10% in early afternoon trading Friday - shows that micro plays into specific events, especially earnings reports, still can be very lucrative.

So, who's next? I teased Roku (ROKU) , Beyond Meat (BYND) and Tesla (TSLA) in yesterday's column, and I am still seeing those names on barchart's high-IV list. Elon Musk, as he often does, stole the market's thunder Thursday with the release of a sure-to-be-leaked email detailing Tesla's chances at reaching 100,000 deliveries this quarter. That takes some of the heat off Tesla's quarterly deliveries report, which, if history holds, would be released next Tuesday or Wednesday, but puts the pressure squarely on Tesla's earnings report. Tesla's investor relations department has not yet set a date for 3Q2019 earnings, but last year the release occurred on October 24th. Thus, the wise play on Tesla is to stay neutral into the sales release - and I am - and prepare for naked call writing of weekly contracts during the week of Tesla's earnings report.

Beyond Meat shares are down today despite news yesterday of a McDonald's (MCD) trial of a plant-based burger from BYND. This stock is just not reacting strongly to good news. In the absence of cash flows, earnings or even a supply contract for its main feedstock, peas, BYND can only move on news. Sentiment has changed, and thus the wise play is to "work" the name by writing weekly call options contracts. Roku is in a very similar position now in terms of market sentiment, which has turned decidedly negative on the streaming device-maker. In both cases I will take advantage of the inflated premia in the options markets to make money on the downside.

That's the great thing about writing (selling) options contracts. Time is on your side. As the time value of the individual contracts decays, your chances at a winning trade increase. Heading into the always-scary October (due to past market crashes, not Halloween costumes) that is exactly the stance I have taken for my firm, Excelsior Capital Partners.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Jim Collins had no position in the securities mentioned.

TAGS: Investing | Markets | Options | Politics | Stocks | Trading | China

More from Investing

Bearish Bets: 2 Nasdaq Stocks You Should Consider Shorting This Week

Bob Lang
Apr 18, 2021 10:30 AM EDT

These names are displaying both quantitative and technical deterioration.

Navigating the Cycles of the Market

James "Rev Shark" DePorre
Apr 17, 2021 10:00 AM EDT

How Recency Bias and the Pareto Principle impact your trading decisions.

Netflix Reports Earnings on Tuesday: 5 Important Things to Watch

Eric Jhonsa
Apr 17, 2021 8:00 AM EDT

Along with its total subscriber adds, keep an eye on Netflix's regional growth rates, as well as its free cash flow guidance and content spending outlook.

Market Indices Continue to Hide Crazy Rotational Action

James "Rev Shark" DePorre
Apr 16, 2021 4:41 PM EDT

Fundamentals and valuations are secondary to shifting money into certain sectors.

Is the Market Wrong on Bank of America? Here's What the Charts Say

Bruce Kamich
Apr 16, 2021 2:21 PM EDT

Let's check in again on BAC after its latest earnings.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 08:05 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    How recency bias and the Pareto Principle impact y...
  • 02:42 PM EDT PAUL PRICE

    Wednesday on Real Money Pro

    Make this stock a 'part' of your portfolio.
  • 04:44 PM EDT PAUL PRICE

    Pretty Incredible + Hard to Believe

  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login