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VIAC, Archegos & Soros

13F season is here again, and that gives us opportunity to see some of the trades made by best fund managers in the world. One name that catch my eye was a new position in the Soros fund of 4.3m shares (194M$) in VIAC at an estimate Avg price of 45.1.

Appaloosa the fund that is managed by David Tepper, also bought 3.4m shares (155m$).


VIAC was one of the names that took a huge hit by the forced liquidation of the over leveraged family office Archegos, last March.


Let's take a look at the charts:

Daily:


We can see that VIAC has entered into a SQC (sideways quite channel) after a harsh winter.


Monthly:

From the monthly chart we can see a reasonable target at the 55-60 levels (which is also the 270 LR on the daily chart (the investors fair price).


As for options pricing, we can see that the implied volatility is back to reasonable place after the collapse in the historical volatility in the last 1.5 months.



Lets look at the skew:


We can see that the ATM (strike 40) has the lowest IV. Also, Jul02 weekly expiry is lower than Jun and Aug.


Let's check the Options Open Interest:



We can see that strike 40/45/50 can help accelerate a melt up if there is a trigger for that. (200K on strike 50 at delta 100 is 1B$)


And focusing on the Jun expiration:



Now let's do the trade frame. Buying C40 to Jul02 at 2.43$ is 6% of the stock price. This is the margin we need in order to hold that trade. The BE point is at 42.43 which is 7% up in the next 44 days.

Another thing to consider is that we won't get 0.24$ dividend on Jun9th which is another 0.6% (if it will be deeply ITM by then, we can exercise the option before the Ex date).


So, Buying 20 Call40 at 2.43$ each (total cost 4860$) will give us the right to buy 2000 shares of VIAC at 40 (exposure of 80K$) for the next 1.5 months.


At the target price of 55$ the calls will be worth 15$ which is 1:5 R:R ratio.


With proper position sizing, this looks like a low risk trade idea.


Cheers




Disclaimer:


The following trade frame is an example for educational purpose only.


We are not an investment advisory services, nor are we registered investment advisors or broker-dealers and do not purport to tell or suggest which securities customers should buy or sell for themselves. Customers should always check with their licensed financial advisor and their tax advisor to determine the suitability of any investment.


It should not be assumed that the methods, techniques, or indicators presented in this example will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. We, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.


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