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Options Activity - Looking Into the Future

January 16th, 2022
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Market Update for the Week Ahead

Ladies and Gentleman,

Welcome back to The Juice, your main source of what’s happening in the markets via momentum and options trades. Today we’ll go through some of the winners and losers from Friday’s action, as well as what might be brewing under the hood when we look further out into the trading horizon. Let’s dive in.

 

What happened last week?

The reckoning continued last week with most stocks making new lows. When the CPI numbers came in at expected levels all of FinTwit celebrated a pre-mature victory… “CPI came in-line with estimates, expect a massive rally” was heard from a distance. All the chanting and singing from the CPI print were silenced only a couple hours later when the market turned sour. What started with the market showing some strength ended with most stocks making lower lows by Friday. Here are Friday’s top gainers and losers:

 

Biotech, energy stocks, and casinos were the clear winners from Friday. Names like BTU have been fairly resilient through this draw down.

 

On the losers side we have retail names like RVLV and DOCN that continue to make new lows. Here’s a look at Bloomberg’s sector performance and where Friday’s moves were made:

 

New vig.io Data Analytics Category: Social Stats

We just launched this week an entire new section to the homepage… we are introducing Social Stats!

Use this to get a feel for which stocks are popular among retail traders, and find out what is EVERYONE talking about!? This includes both stocks and crypto, but on the stocks side there are a few sub-categories to choose from depending on what you are interested in.

  • Meme stocks?
  • SPACs?
  • Short-squeeze list?

We’ve got it all down, here’s a preview from this weekend’s data:

 

Top Stocks & Meme Chatter

Need your meme fix? Check out the trending meme stocks for potential momentum plays that are on retail trader’s radar.

 

Short Squeeze List

Similar to the meme-stocks, the Short-squeeze list offers names that are being correlated to the infamous “short-squeeze” term. BBIG was the talk from Friday after closing +15% for the day.

 

Crypto Social Stats 

We've also got the most talked about crypto coins and which names retail traders are focusing on. Bitcoin (BTC) and Ethereum (ETH) are usually the top two candidates, but Dogecoin (DOGE) has made an obvious run the last few days with a 20%+ move to the upside and making it the 3rd most talked about coin.

 

Unusual Options Activity - The Custom Scan 

With all this market chop we wanted to see where options whales, whether an individual player or a fund with vast amount of capital, were setting themselves up in 2022. We navigated to the OptionsMatrix and did a custom search with the following criteria: 

  • Premium greater than $50k and less than $1 million (removes small plays and usually a lot of ETFs/mega-cap stocks)
  • Size greater than 500 for the same reasons mentioned above.
  • Expiration dated further than Mar 4, 2022.

This includes both calls and puts and here are the results: 

We want to break down individual names from this list, but at first glance what we're seeing are call options being traded where the aggressor of the trade was the buyer (bullish) and put options being traded where the aggressor is the seller (neutral-bullish).

The put options that are getting traded at the bid, and most likely sold as an opening position could be are what’s called a “cash-secured-put” (CSP). **A CSP is a strategy where the option seller assumes a short-to-mid-term bottom is building in the stock and is willing to take on the risk of opening the position in the form of collecting premium**

Some of the names up here were: Palantir (PLTR), Russell 2000 ETF (IWM), and Snap (SNAP).

 

Palantir (PLTR)

A block of 3,400 contracts were traded where the buyer was the aggressor in the trade. The contracts expiring in September traded at the $16 strike for $2.90 per contract and a total trade value of $980k in premium. This gives the buyer a break-even share price of $18.90. Current share price of PLTR is $16.

 

Russell 2000 ETF (IWM)

Someone hit the IWM with multiple sell orders on the PUT side. Strikes were between $205 and $210 with the top 3 blocks trading at a total premium of roughly $900k per trade. Current share price of IWM is $214 so a player may be placing a bet that the small cap ETF will stay at or above $210 by May and June of this year.

 

Snap (SNAP)

The SNAP play was intriguing to us seeing puts being sold and bought at different strikes, so we had to dig deeper. Here’s a screenshot of what we found:

The data is showing a huge block of trades coming in at the $35 and $40 strikes and all with the same position size. These are more likely than not part of the same position, here’s my take on it. A player was selling $40 strike puts on SNAP to collect that premium while simultaneously purchasing the $35 strike puts to create a credit spread. They are net positive on premium collection, rather than going long on a short position.

SNAP is down roughly 50% in the last two months alone so a player may be taking a gamble thinking we are at a short-term bottom. What the play is suggesting is that SNAP needs to stay above $37 by June to break-even or above $40 to collect their maximum amount of premium from the position.

 

Summary 

These are just some ways to utilize options activity into your trading. Whether it’s looking at options order flow, following smart money, or the big players in the game, options flow can be a strong indicator of market sentiment.

Lastly, use social trends to find break-out stocks before they move. In today’s era of trading momentum changes fast and if you aren’t tracking your stocks’ social trends you are already one step behind.

Don’t forget we’ve got new contests of our Daily Fantasy Stocks cash games starting every day with real cash prizes up for grabs. Load up those watchlists and get started before the games fill up for your chance to win, they are free to enter so give them a go… “literally risk free money”.

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