Chris Robb, Head of Research at Punk Rock Traders, breaks down this earnings season’s top plays, from TSM’s killer gains to Walgreens’ surprise comeback. At Punk Rock Traders, we don’t play it safe – we use options and risk to crush Wall Street’s outdated thinking and chase big wins. Forget wealth preservation. This is about turbocharging your portfolio with high-reward trades. Welcome to the future of trading.
Video Transcript
Good morning, Punk Rock Traders! We have a lot of positive developments to share. We feel very lucky this earnings season to have picked some of the season's biggest winners. By using options and leverage, we've been able to amplify returns and deliver some really attractive results for you, which is exactly what Punk Rock Traders is all about.
One particularly fortuitous development was $TSM's incredible earnings numbers this morning. They absolutely smashed guidance and blew the numbers out of the water. This performance really ended the doubt surrounding the semiconductor industry after ASML's small miss. It's important to note that ASML has a very niche business model—its machines cost $120 million each and are the size of school buses, so they're very sensitive to export curbs and uncertainty around Chinese demand. That was an idiosyncratic issue. TSM, being a much larger player in the industry, showed that the AI revolution is in full swing.
Now, let’s talk about some of our other calls and how they played out during earnings. We called our trade on Walgreens “walking the dog” because it was one of the most unfavored stocks in the market. It was having a terrible year, down in the single digits. One of the issues was that about a quarter of their stores were unprofitable. They're closing around 8% of their stores and likely have a plan to make the remaining unprofitable stores more lucrative. They also have new management, and they weren’t removed from the index, which means they’ll still benefit from institutional buying by those purchasing the wider indexes.
We got into Walgreens when it was in the low $9 range, and it jumped up rapidly after this earnings report. I believe it's near $12 now, or maybe $11. So our option on it was up in the mid-single digits within a day, and it’s doing well. We’re proud of this trade because it was a very contrarian call on a hated stock. Walgreens is a symbol of one of the most despised stocks in the market. One reason it suffered so much is that they did a dividend cut, which was ultimately a financially sound decision. But when trading options on Walgreens, we don't have to worry much about dividends—we can just rent the stock and ride the bounce, which is exactly what we did. We recommend keeping this trade because I think there’s still interest in the stock as they implement their turnaround plan.
Hims & Hers also had an outstanding week. They haven't reported earnings yet, but several fortuitous developments occurred, including a positive outcome with LPL drugs and their inclusion in the midcap index. They’re a strong company with solid fundamentals, and our options trade on them is already up over 50%. They’re currently trading in the $17 range, and we recommended this as part of our long-term equity anticipation securities segment. This trade has the potential to make you a small fortune, with two years of time value and solid gains already. These LEAPs don't expire until 2027, so if the company continues on this path, these LEAPs could be worth a lot. It’s always satisfying to get a small cap right, and we’re proud of this call.
Now, regarding Taiwan Semiconductor, which we mentioned earlier, their earnings were boosted by higher demand. They also announced they won’t be buying the Intel foundry, which the market likely saw as a positive. The big takeaway here is that they raised guidance, alleviating some of the concerns following ASML's report.
Next, our oil call, made during the peak of Israeli-Iranian tensions, appears to have proven fruitful. The worst fears that led to the rapid rise in oil prices haven’t materialized. Israel has shown restraint, and their acquisition of a U.S. high-altitude missile system indicates that their primary strategic benefactor is exerting some influence, likely reducing the chance of a regional conflagration. The bigger development, though, is the Saudi and OPEC incentives. Saudi Arabia is committed to defending supply, even if that means accepting lower prices for a while. This has proven to be a far bigger catalyst for oil prices than the Israel-Iran situation, as we anticipated.
Regarding our VIX call, we’ve had several VIX shorts blow up due to geopolitical spikes, but our VIX call option at $16 on October 16th expired 99% in the money. It was a nice hedge for those exposed to geopolitical risk. As you can see from this VIX histogram for October, higher extreme values from the global financial crisis distort the averages. However, many years have seen the VIX start high and end lower, and I think this year is a good candidate for that pattern to repeat. Remember, European-style options on the VIX pay cash directly into your account upon expiration, so if you bought in at $2.50 when we suggested and held to expiration, you'd have received $4.97 per option. We have more contracts expiring in November and December, and I believe they’re well-positioned for the post-election volatility crush. So, hold onto those contracts.
Yesterday was the last day that contracts closest to the election were included in the VIX calculation, and as I mentioned, there are multiple catalysts suggesting a collapse in volatility.
Lastly, our trade of the week was on gold. While we’re not gold bugs at Punk Rock Traders and generally see gold as an emotional asset, it has done well recently, likely due to the emotional nature of current markets. Despite the economy growing at over 3%, a strong jobs market, and a healthy consumer, pessimism remains pervasive. In fact, we noted in this morning's update that pessimism is often a feature of early-stage bull markets.
As the bull market progresses, I expect investors to shift toward riskier assets and away from gold, which is typically a hedge against inflation and geopolitical risk. Inflation is largely behind us, and there are so many positives in the market that I believe gold money will start chasing risk assets. Additionally, I don’t think millennials are inclined to own gold, and if they inherit it, they’ll likely sell it.
That’s why I initiated a short on gold with a lot of time value—it expires in early 2026. So, you have time for the trade to work. Short-term turbulence may offer a chance to lower your cost basis, but I recommend holding this for a while, as I believe stock outperformance will soon end gold’s rally.
I couldn’t be happier with Punk Rock Traders’ performance so far. We’ve delivered exactly what we promised, providing you with above-market returns. We truly appreciate the support of our subscribers, and we rely on your trust. We hope these trades are helping you make it rain, as we’ve given you the opportunity to achieve excess returns. That’s what we’re about—showing that options trading is more than just a sports bet; it’s about using conviction to augment returns.
Thank you for your support, and we’ll talk again soon!
