After AI: The Final Frontier
There is likely plenty of growth left in AI, but in one sense, it's a mature investment theme. The biggest AI-related names are some of the biggest names in the stock market. Nvidia (NVDA), for example, has a market cap of $3.5 trillion. In contrast, the biggest name in space, Elon Musk's still-private SpaceX, has a valuation about a tenth as large.
Two space companies that spiked on Friday, Rocket Lab (RKLB) and Intuitive Machines (LUNR), have market caps of about $14 billion and $3 billion, respectively.
LUNR spiked 13%...
And RKLB was up 15%.
(The numbers in blue and red on the charts are the stocks' overall technical ratings and set-up ratings, respectively, via Chartmill).
Why Didn't You Write About These Before Friday's Spike?
We did, for our Substack subscribers. Both were Portfolio Armor top names last month, and we placed trades on both then.
Why We Placed Bets On These Names
Two reasons:
- They were Portfolio Armor top ten names. Since December of 2022, our system's top ten names have returned 18.53% over the next six months. Over the same time frame, the SPDR S&P 500 Trust (SPY) has returned 12.61%.
- We recognized Rocket Lab and Intuitive Machines as both belonging to a hot investment theme, space.
The Trades We Placed On Both
We opened call spreads on both of these stocks.
- For LUNR, we opened a vertical spread expiring on June 20th, buying the $17 strike calls and selling the $18 strike calls, for a net debit of $0.20. The max gain on this trade, a return of 400%, occurs if LUNR is trading at over $18 in June. It closed at $21.89 on Friday.
- For RKLB, we opened a vertical spread expiring on April 17th, buying the $30 strike calls and selling the $31 strike calls, for a net debit of $0.23. The max gain on this trade, a return of about 330%, occurs if RKLB is trading over $31 in April. It closed at $28.74 on Friday.
Probably More Room To Run
Both stocks have significant short interest, 10.16% of its float for RKLB, and 17.58% for LUNR. Short-covering could boost both stocks if their rallies continue. Judging by their price action so far, the targets we used in our call spreads may have been too conservative.
We'll look for opportunities to add more aggressive trades on both. If you'd like a heads up when we do, you can subscribe to our trading Substack/occasional email list below.
And if you already own these stocks, and want to lock in some gains, you can download our optimal hedging app by aiming your iPhone camera at the QR code below (or by tapping here, if you're reading this on your phone).
If you'd like to stay in touch
You can scan for optimal hedges for individual securities, find our current top ten names, and create hedged portfolios on our website. You can also follow Portfolio Armor on X here, or become a free subscriber to our trading Substack using the link below (we're using that for our occasional emails now).
