Jon "DRJ" Najarian . Bullish on GOOGL: Massive call buying

Key Concepts

• Retail Investor Revolution: The growing influence and legitimacy of individual investors in the market.
• Bullish Call Buying: Purchasing call options with the expectation that the underlying stock price will rise.
• Rolling Up and Out: An options strategy where an investor closes an existing position (sells) and opens a new one at a higher strike price (up) with a later expiration date (out).
• Bullish Combo (Synthetic Long): A strategy involving buying calls and selling puts, which mimics the risk/reward profile of owning the stock outright (being "naked long").
• VIX (Volatility Index): A measure of market expectations of near-term volatility; lower VIX levels generally correlate with cheaper option premiums.
• Leverage: Using options to control a larger number of shares with less capital, thereby magnifying potential returns (and risks).

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1. Market Sentiment and the Retail Investor

John Najarian, co-founder of Market Rebellion, argues against the dismissive attitude toward retail investors. He contends that labeling retail investors as "rubes" or "stupid" is a sign of institutional arrogance. He draws a parallel to figures like Elon Musk, suggesting that "rebels" in the market deserve respect for their impact and participation.

2. Analysis of "Magnificent Seven" and Tech Stocks

Najarian asserts that the "Mag Seven" trade remains viable, highlighting specific performance metrics for Alphabet (Google):

• Advertising Revenue: Up 19% (countering fears that AI would cannibalize ad spend).
• Cloud Revenue: Up 63%.
• Gross Profits: Up 62%.
• Net Profits: Up 57%.

Options Activity: Najarian noted significant institutional interest in Alphabet via 45,000 call options (May 15th expiration, $355 strike) when the stock was trading at $336. The stock subsequently surged past $355, $370, $380, and $390.

3. Options Strategies and Methodologies

The discussion highlights two primary methodologies for navigating high-priced stocks:

• Rolling Up and Out: Used when an investor is already in a winning position. By selling current calls and buying calls with a higher strike price and later expiration, the investor locks in gains while maintaining exposure to further upside.
• The Bullish Combo: A strategy where an investor buys calls and sells puts. This creates a "synthetic long" position. Najarian notes this indicates "significant confidence" from the trader, as it effectively replicates the behavior of owning the stock without the full capital outlay.

4. Market Environment and Risk Management

• VIX and Premiums: Najarian points out that option premiums have become more attractive as the VIX has dropped from the 30s (in March) to approximately 17.5. Lower volatility makes options more affordable for retail traders.
• Capital Efficiency: Najarian argues that for high-priced stocks (e.g., $300–$1,000+ per share), options are the most efficient way to participate. They allow traders to "trade bigger" by using leverage while simultaneously limiting total risk compared to buying the underlying shares outright.

5. Notable Mentions

• Intel: Highlighted as a stock with aggressive call buying activity. Najarian noted the stock's massive appreciation (from ~$20 to over $110) and mentioned market rumors regarding a potential deal with Apple.
• Digital Ocean (DOCN): Identified as a stock with strong fundamentals and momentum, currently on the radar for potential options plays.

Synthesis and Conclusion

The core takeaway is that the current market environment—characterized by lower volatility (VIX at 17.5)—provides a prime opportunity for retail investors to utilize options. By employing strategies like "rolling up and out" or "bullish combos," investors can gain leverage on high-growth tech stocks like Alphabet and Intel while maintaining disciplined risk management. Najarian emphasizes that options are not just a speculative tool, but a necessary framework for retail investors to compete effectively with institutional capital.