As I write this, a half hour before the markets open, the S&P 500 futures are in negative territory, as investors worry about trade negotiations with China. 

The White House says negotiations are underway, but the Chinese Foreign Ministry has refuted this claim. Like much of economic and trade policy, it’s difficult to know what’s accurate and what’s not. 

That’s never a good place to be if you make long-term investment decisions. Should the markets end the week on a downer, it would erase some of the gains made over the previous three days.

Nonetheless, it’s a good day here in Halifax, as my hometown Toronto Maple Leafs won in overtime for the second straight game in its Battle of Ontario matchup with the Ottawa Senators. Go Leafs Go!

In yesterday’s unusual options activity, 727 calls expiring in seven days or more had Vol/OI ratios of 1.24. Of those, 250 were less than $100. 

These three were in the top 100 and are worth considering. 

Have an excellent weekend.

Cemex (CX)

According to the Barchart Technical Opinion, the Mexican cement and aggregates producer is currently a Sell. As for analysts, 17 cover its ADR, with 12 rating Cemex (CX) a Buy. The median target price is $8, 44% higher than its current share price.  

In 2024, the company’s revenue fell 2%, to $16.20 billion, or 1% on a comparable basis. Meanwhile, its operating earnings increased by 4%, to $1.82 billion, a healthy 11.2% operating margin. 

According to S&P Global Market Intelligence, Cemex’s enterprise value of $15.5 billion is 4.73x its EBITDA (earnings before interest, taxes, depreciation, and amortization), the lowest multiple in the past decade.

Tariffs aside, the May 16 $6 call looks good and could have been had yesterday for $25. 

The call's Vol/OI ratio was 87.12, the third-highest yesterday. With a delta of 0.40826, you could double your money by selling the call before expiration if its shares appreciate by $0.61 (10.7%).

While the likelihood of the call breaking even is around 30%, the price to play is just $25. It’s a risk worth taking. 

Pinterest (PINS)

Pinterest (PINS) remains the only social media platform I use, as the others have gotten too toxic. 

There is no question that its stock has underperformed since going public at $19 in April 2019, up 36% in the six years since its IPO, compared to 89% for the S&P 500.  

The company reports its Q1 2025 results on May 8th. Analysts expect it to report 26 cents earnings per share and $1.85 for 2025. PINS stock trades at less than 14x this estimate. 

Investors are worried about a slowdown in ad spending. However, it’s been my experience that in challenging economic conditions, the biggest companies, especially those advertising on Pinterest, don’t cut their ad budgets to remain engaged with their customers. 

Of 43 analysts covering its stock, 33 rate it a Buy (77%), well above the average for S&P 500 companies. The median target price of $40 is 55% higher than its current share price. 

Pinterest had three unusually active call options yesterday. I’m focused on the June 20 $38 call. 

You could buy a call for $17 yesterday, or just 0.45% of the strike price. With 57 days to expiration (well after its Q1 2025 report), you can double your money by selling before June 20 if its share price appreciates by $2.70 (10.5%). 

The trend might be lower, but a positive earnings surprise will get you there. 

Caesars Entertainment (CZR)

Caesars Entertainment (CZR) stock is down 26% over the past 12 months, considerably less than the 8% gain for the S&P 500. In early April, the casino stock hit a 52-week low of $21.40, the lowest point since May 2020.

Have people stopped gambling? No, they haven’t.

In 2024, it generated $3.6 billion in EBITDA from $11.25 billion in revenue. Except for 2023, it was the highest EBITDA profitability since it spun off its real estate assets into VICI Properties (VICI) in October 2017. 

The company is in the crosshairs of activist investor Carl Icahn for the second time in six years. 

The first time was in 2019, when Icahn took a nearly 10% stake in the company. His participation led to the firing of the CEO, Icahn, who got three seats on the board and pushed for the $8.6 billion merger with Eldorado Resorts, which ultimately happened in July 2020.

The second time was last May. Only this time, he was purely involved as an investor who viewed CZR shares as undervalued. As of Dec. 31, Icahn held 2.44 million shares, representing a little over 1% of its outstanding shares.   

Despite a much smaller stake than last time, he convinced the company to expand its board by two people, to 12 directors, with Icahn Enterprises’ general counsel and CFO joining Caesars' board. 

As long as Icahn is an investor, the stock has a promising future.  

Caesars’ May 16 $32 call had the 10th-highest Vol/OI ratio for calls yesterday at 31.60. 

Like the two previous stocks, the profit probability is low, at just 14,69%. However, like the other two, it’s a contrarian value bet. The information below is from today’s trading. As you can see, the ask price is $0.13 higher at $0.36, an outlay of $36. 

The share price has to appreciate by nearly 15% over the next three weeks to break even. Down 15% in 2025, that’s a tough ask. 

However, with Icahn’s input, the company is deciding whether to spin off its digital gaming business. If it were to announce news about the spinoff before May 16, the share price would likely move up or through the $32.36 breakeven.  

At just 1.1% of the $32 strike price, the risk/reward is reasonable.