From Cold Storage to Electric Storage

Hey Influence Traders,

I hope that everyone had an amazing weekend.

I slipped in some quality family time, including watching my son play rugby – he’s a beast!

This week I’m out on a mission testing some top-secret military technology in the high desert of California — as DC and Wall Street Insiders do — so I’ll keep this short and sweet.

Electric Storage

Last week we looked at cold food storage.

This weekend, my network alerte me to a start-up called Solid Power, which is developing solid-state batteries as an alternative to lithium-ion batteries.

That got me thinking about how to make an early entrance into this new battery tech.

Solid Power is a start-up company that makes solid-state batteries.

Unlike lithium-ion batteries, which are the go-to for electric vehicles, solid-state batteries don’t use a liquid electrolyte.

That means that solid-state batteries are lighter and have greater energy density, which provides more range at a lower cost.

The tradeoff is that they are more costly than lithium-ion batteries — and the tech is still new.

Despite being a start-up, Solid Power is getting some high-profile attention.

Ford and BMW just lead a $130 million funding round for the company.

That investment comes on the heels of Ford announcing that it plans to put $22 billion into vehicle electrification through 2025.

While Solid Power is a start-up, QuantumScape (Ticker: QS) develops solid-state lithium-metal batteries for use in EVs and currently is trading on the NYSE.

QS went IPO in August 2020 and is headquartered in San Jose, Calif.

As regular readers know, given Biden’s Buy America focus, I lean towards U.S. companies that have a green energy tilt.

QS claims that the increased energy density of its solid-state lithium-metal cells will translate into a 50-80% range improvement over today’s leading electric vehicles. That’s HUGE!

While QS’s stock price has cooled recently, along with the rest of the EV sector, I’m adding this to my Starting Lineup watch list to see if we can get some interesting trades around it.

And if the infrastructure bill kicks in, QS should benefit.

Power Moves Portfolio Trade

Power Moves trader extraordinaire Andrew Giovinnazi is putting some meat in today’s piece.

He looked at my Power Moves weekend update, examined one of my ideas, crunched the market volatility around it and put a hot semiconductor trade in play.

From AG:

 

I like Frank’s idea for Taiwan Semiconductor Manufacturing (Ticker: TSM). As you can see below from the top chart, TSM has gotten the beatdown lately from the high $130s to its current price around $116.

 

TSM 2 year candlesticks top graph, TSM 2 YEAR 60 Day Implied Volatility (IV) in Yellow, bottom graph

 

Implied volatility is pretty low here which means the price of calls and puts are cheap. I am more interested in calls and a bounce back up to the $120’s as investors look for the stock with the best chance to bounce after all of Big Tech got sold after this earnings cycle. I want to buy some June calls and write — that means sell — some calls against it.

 

Think of this as a buy-write, but instead of buying stock I am buying a much less expensive TSM Jun18 120 call for around $3 …

If TSM rallies quickly, I will sell a call against it to bring in some premium dollars. I will buy four calls since I want to spend about $1,000 per trade.

 

Part 2 of the Thesis Is Weak Tech

 

Almost every Big Tech company, car company and electronics company that make gizmos needs chips.

 

There is a shortage of chips and that will hit the Invesco QQQ Trust Series 1 ETF (Ticker QQQ), with Apple (Ticker: AAPL) at the top of the list. See the chart below showing QQQ implied volatility is at a six-month low.

 

PowerShares QQQ ETF (QQQ) 30 day implied volatility is the red chart in the bottom half

 

QQQ got to $301 in early March and I don’t see much below that with $320 as a more recent low.  I can buy 1 QQQ Jun18 330/315 put spread for 3.54 or buy 2 put spreads for $700.  It is not easy to short this market but I don’t see how the chip shortage does not hurt with QQQ only 6 points off of the all-time highs.  I pick a put spread because it does give me a reduced cost overall.

 

Now put both ideas together.  I have a long trade in TSM and a short trade in QQQ.  One is a long direction trade and one is a short direction trade.  Together both are market neutral; if the broader market drops a lot I will do ok with the QQQ puts but if we get a run TSM should participate if our thesis is correct.  My plan is to make money on both.

 

My Current Trade

 

Andrew and I own the Palantir (Ticker: PLTR) May21 24 calls and 21.5 puts. After a rally to near $24, PLTR has faded. We wanted to generate a couple of dollars before earnings.

Andrew’s idea was:

      • Buy the PLTR May07 24/23 puts 1×2 for even money to bring in some cash. However, we never got close to being filledl, so …
      • With the drop in PLTR, Andrew bought the May07 23.5/22.5 1×2 put spreads for a .15 debit. We never saw a credit and this is a good play to pay for a good part of our strangle.
      • Andrew bought 1 put and sold 2 puts two times total to finance the strangle, so it should bring in about $80 per spread.

So that’s where we’re at for the moment. Questions about this, drop us a comment below.

In the meantime, I’m getting back to testing this top-secret military tech …

Cutting Through the Noise for You,

Frank

 

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