Good afternoon all - hope everyone enjoyed their day today as the broader market seemed pretty indecisive ranging about +/- 21 points in total. Absolute snooze fest for the indices, but some key stocks largely outperformed the session if you were allocated properly. Let’s look at today’s basket.
Notable Flow:
LI 0.00%↑ 25C 12/20 Exp.
ACLS 0.00%↑ 90P STO 10/18 Exp.
DOW 0.00%↑ 57.5C STO 12/20 Exp.
DAY 0.00%↑ 65C STO 11/15 Exp.
LI 0.00%↑ 25C 12/20 Exp.
Vol: 6,940 OI: 622 Avg: $1.53 Prem: $1,058,482
About 7k contracts were traded on this chain, which only carried 622 OI. Most of the volume came on the Ask side, which spiked the call net premium, reaching the highest level in the past 30 days. The chain started to get crowded as the day went on, followed by many spikes in volume. Even with the most volume at the Ask, we must double-check how much OI will stick tomorrow.
Interesting EV China name here with some upcoming catalysts to potentially trigger this trade to succeed:
Monthly delivery reports - typically within the first few days of each new month
Earnings report November 15th
During today’s session, LI tests the trendline shown from recent all-time-highs. Also shown is the 10 & 20 week moving averages converging as the 10-week looks to cross over the 20-week supporting the notion of continued upside from this recent base. Some significant levels are also shown on the chart where one may look to trim or even stop out of the potential trade.
ACLS 0.00%↑ 90P STO 10/18 Exp.
Vol: 1,713 OI: 402 Avg: $1.21 Prem: $207,296
This trader is placing a bullish bet, speculating that the stock will remain above $90 by the expiration date. The stock had its highest options volume today in the past 30 days.
Seemingly a play on the semi-conductor industry as ACLS produces systems critical for the chip fabrication process, they tend to run hand-in-hand with this sector. We have discussed the importance and strength of the 200-week moving average in previous letters. The strike chosen to sell correlates directly to this mark as shown below. Risk is pretty defined here as the chart seems to have based just above that 95 mark. An immediate target could be 115 which is about a 13% move from current levels.
DOW 0.00%↑ 57.5C STO 12/20 Exp.
Vol: 7,700 OI: 2,605 Avg: $0.47 Prem: $359,906
This Whale speculates that the stock will not trade above $57.5 by expiration. Trading over 7k contracts at the Bid on credit for almost $334k, making up almost all the daily volume on this chain. In addition, the stock had its highest options volume in the past 14 days.
With a strike nearly 10% out of the money, the chart displays a standard deviation range indicating lower for longer. Amid a steady decline and decreasing over -14% since April, DOW continues to reject the 50-day moving average and upper zones of the standard deviation channel alike. A lot of overhead resistance on this chart bodes well for the whale’s position.
DAY 0.00%↑ 65C STO 11/15 Exp.
Vol: 4,100 OI: 1 Avg: $1.60 Prem: $656,971
Another example of a Whale that is selling calls for a bearish strategy; in this case, the Whale speculates that the stock price will not be above $65 by the expiration date. A total of 4.1k in volume on a chain that only had 1 OI. During the trading session, there were three big trades, 1k, 1.3k, and 1.5k, all at the Bid. This has caused the call net premium to be negative for the day and to reach the lowest levels in the past 30 days.
DayForce experienced some insider selling during last week which could raise cause for concern from investors in regards to potential news that the public may not be privy to. To pair with that information, we also see a bear flag on the weekly chart as the asset nears the top of the bollinger band indicator which can be used as a trimming zone for longs & entry position for short-term bears. The last time this upper band was tested (red line), DAY lost over -33% in value over the course of the next couple months.
That wraps it up for today folks. Be sure to check back in the subscriber chat in the morning for OI checks and any other possible commentary there is to be had. Hope you all enjoyed the read and likes are greatly appreciated.
Best Regards,