Game 5 of the Knicks-Spurs NBA final goes tomorrow night. New York can take home the championship for the first time in 53 years with a win on the road. I’m sure a lot of New Yorkers will be watching. It should be fun to watch.
Yesterday was a good day in the markets as President Trump put the on-again, off-again war in Iran on hold to see if all the parties could come up with a peace plan. I’m skeptical.
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The S&P 500 jumped 1.75% on the news, while the Nasdaq gained 2.54%, and the Russell 2000 jumped a whopping 3.02%.
The big news today: SpaceX is expected to start trading at some point today, and when it does, Elon Musk, at least on paper, will likely become the world’s first trillionaire.
For context, only 21 countries have trillion-dollar GDPs. Musk is now equal to Switzerland in economic wealth. According to Forbes, Musk became a billionaire in 2012. In 14 years, he’s added three zeros to his net worth. It’s unfathomable.
In the options market yesterday, volume was 67.97 million, more than 5 million higher than the 90-day average. Interestingly, despite the big gains in the markets, calls only accounted for 56% of the volume. In recent days, the percentage of calls has been higher, well into the 60s.
Today, I want to look at unusually active LEAPS (Long-Term Equity Anticipation Securities) call options. In yesterday’s trading, there were 28 that fit the description.
Three of them provide investors with low-expense, low-risk investments.
Have an excellent weekend!
Pfizer (PFE)
As you can see, none of the three has a Vol/OI (volume-to-open interest) ratio in double digits. If you include options expiring in less than seven days, the top call option by Vol/OI ratio was Starbucks (SBUX) at 177.02. But I digress.
It seems as though I’ve talked quite often about Pfizer (PFE) in 2026. In reality, I’ve only discussed the large-cap drug company twice this year, the last time on March 19. My commentary focused on the May 15 $24 put, which had a Vol/OI ratio around 75. A long straddle was the play. It didn’t work out as Pfizer’s stock was between the upside and downside breakevens.
I continue to believe that Pfizer is doing enough to move on from the success it found during Covid. It’s working on GLP-1 weight-loss drugs to compete with Eli Lilly (LLY) and Novo Nordisk (NVO). It has two cancer drugs in late-stage clinical trials: sigvotatug vedotin, intended to treat lung cancer, and mevrometostat, intended to treat metastatic prostate cancer.
As a result of these drugs in the pipeline, RBC Capital Markets upgraded PFE stock on Thursday to Sector Perform from Underperform.
That’s not an endorsement to buy by any means -- 17 of the 28 analysts covering Pfizer rate it a Hold (3.46 out of 5) -- it means that if you’re an income-focused investor, the 6.6% dividend yield should be a reason to sniff around at least.
Buying the stock at current prices gets you the dividend, and selling the June 17/2027 $35 call provides an additional 1.3% in annual income from a Covered Call.
Best case, the stock hits $35 by next June; you’ve generated a 35% return from the stock’s appreciation, and $2.07 a share in dividend and premium income, for a total return of 43%.
Walt Disney (DIS)
Is it me, or has Walt Disney (DIS) stock seemed to struggle in recent years to stay in triple digits? It has traded over $100, by my count, on six occasions since the end of 2022 -- 1 in 2023, 2 in 2024 and 2025, and 1 in early 2026 -- and five-and-a-half months into 2026, it continues to bob above and below $100.
So, the idea that it’s suddenly going to blast off to $150 over the next 12 months does seem a little far-fetched. However, analysts still seem to buy what it’s selling. Of the 31 covering DIS stock, 26 rate it a Buy (4.48 out of 5), with a target price of $133.03, 33% higher than its current price.
Reading through Disney’s annual report is a treat. There are so many revenue and income generators to reflect on that it takes considerably longer to go through than the average 10-K.
In recent years, its streaming business has been a big focus. In 2025, Disney’s Direct-to-Consumer business generated $24.61 billion in revenue (26% overall) and $1.33 billion in operating income (8% overall), but it is its Experiences segment that provides the biggest advantage.
The company’s Experiences segment generates 38% of Disney’s revenues and 57% of its operating income. It is the company’s true moat. These businesses require large investments that Disney’s strong cash flow can provide.
With a share price that is just 13.73 times its cash flow per share, the lowest it’s been since 2020, and 2017 before that, Disney’s share price should be higher than $100.
While I don’t see a problem with doing a covered call here, the premium only provides a 2% annual return, while the dividend yield is another 1.5%.
If you’re bullish, you might want to forget about the income and buy a long call for $2.56 or 2.6% of the share price. If the stock appreciates by $16.92 (16.9%) sometime before next June, you can double your money by selling to close your position. The expected move is 20.7%.
Amazon (AMZN)
I have a love/hate relationship with Amazon’s (AMZN) e-commerce and Prime business. On the one hand, it’s super convenient to order things needed around the house, saving me trips out, etc. Furthermore, Prime Video does get used quite a bit, so there’s that. However, it drives me up the wall when I get charged for subscriptions I know I didn’t sign up for. I’ve had that happen three times this year. Multiply that by 20 million people, and it’s a big deal.
Fortunately, Amazon is a lot more than e-commerce, which is why it remains an attractive long-term investment.
I looked at all of Amazon’s Q1 results from 2000 through the latest first quarter results released at the end of April. It has grown revenues in all 25 years, according to S&P Global Market Intelligence, while growing operating income about two-thirds of the time.
That’s remarkably consistent over such a long period, and the only reason operating income wasn’t higher in more of the years is that Amazon isn’t afraid to sacrifice profits when it wants to capture a certain market or get into a new business.
The willingness to sacrifice when investments are needed also applies to free cash flow. In Q1 2026, for example, its revenues were 17% higher, to $181.5 billion, with an operating profit of $23.9 billion. Yet, its free cash flow for the trailing 12 months fell to $1.2 billion because it increased its property and equipment purchases by $59.3 billion over the previous year, primarily for AI-related investments.
Despite all of the additional spending, it finished the first quarter with $104.69 billion in cash and cash equivalents, 50% higher than a year earlier.
Cash is definitely King at Amazon.
Like the Disney call, Amazon’s July 16/2027 $370 call looks like a nice leveraged bet on Amazon’s future stock price. The $10.55 ask price is 4.4% of the share price. Anything under 5% is a very good use of leverage.
Of all the Mag 7 stocks, Amazon has the worst 5-year performance, up just 42%, considerably less than the S&P 500. It’s bound to deliver for shareholders at some point.
With four more weeks than the Disney and Pfizer calls, you can double your money by selling to close before expiration if Amazon stock appreciates by 19.5%. The expected move is 26.71%.
It’s more than possible.
On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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