To The Moon

Black Thursday, with all three major U.S. stock indices falling over 1%. Among them, the $NASDAQ(.IXIC)$ suffered the most significant drop at 1.82%, while the $S&P 500(.SPX)$ declined by 1.6%, marking its worst single-day performance since the Silicon Valley Bank (SIVBQ) crisis. The $iShares Russell 2000 ETF(IWM)$ , representing small-cap stocks, also dropped by 1.62%, with the top-weighted stocks experiencing even greater declines.

Therefore, this two-day pullback is primarily concentrated in heavyweight stocks.

Among them, $Amazon.com(AMZN)$ fell by -4.41%, the largest drop among big tech stocks, while the volatile $Tesla Motors(TSLA)$ saw a -2.62% decline, which is relatively manageable. Safe-haven funds piled into the healthcare services sector, such as $UnitedHealth(UNH)$

So how did options perform when the overall market experienced a pullback?

Looking at the unusual options activity list, we can see a lot of near-term options (including many 0DTE options). Moreover, a significant number of options are concentrated in big tech heavyweight stocks.

Why are there more Call options in unusual activity? Because as stock prices decline, both buyers and sellers face pressure to close positions. At the same time, for enthusiasts of near-term options, it presents an opportunity to bet small for a big payoff, attracting more speculators.

From the perspective of PUT options, because of the significant drop this week, many at-the-money and out-of-the-money options have moved into the money, giving buyers greater incentive to close or exercise them.

For example, $Apple(AAPL)$ ‘s PUT options around $190 are now considered deep in the money, and options around $175 are trading very actively.

$Amazon.com(AMZN)$ which experienced a significant drop this week, had been trading above $130 for the past two months. Breaking below $130 triggered a significant number of bullish Call options with strikes around $130-135 to close out, and bearish investors who had covered with CALLs might also close their positions to avoid losing the underlying stock during a rebound.

In this pullback market, selling PUT options becomes more challenging. For those who have already sold PUT options, it's highly likely that they may end up taking delivery as options move from out-of-the-money to in-the-money. It's important to note that as stock prices decline, the margin required for selling PUT options keeps increasing. For investors who haven't initiated positions but want to do so, choosing the right strike price becomes even more critical.

At this time, stock prices often hug the lower Bollinger Band, while the Bollinger Band's center keeps declining.

For example, AMZN, for safety, the exercise price for PUT options in the next 30-40 days should not exceed 115. Even if you pick up at this level, there is hope for a short-term rebound and profit.