Thursday saw more rolling activity compared to Friday, which aligns with the concept we discussed yesterday - taking profits on the initial selloff by rolling winning put positions.
Additionally, we saw a decent amount of options being exercised rather than closed out. This implies traders felt this week's move may have fallen short of expectations, whether that's not reaching a target strike or having negligible premium left. However, by exercising, it suggests they maintain a view for further downside ahead, just not necessarily continuing through Friday's session.
In plain English, Friday's trajectory could differ from next week's, essentially a bet on a bounce Friday but continuation lower next week. But that's more of an isolated view from the exercise flows - we'd need to look at overall positioning to gauge consensus.
On that front, Friday's flows didn't appear too aggressive. QQQ had a balanced strangle initiation: Buy QQQ 20240802 463 Calls & Buy QQQ 20240802 463 Puts - but the tight expiry suggests more of a 3%+ extreme move hedge than a directional view.
The standout flow was a bullish call spread:
Sell TSLA 20240802 227.5 Calls
Buy TSLA 20240802 225 Calls
If you don't envision much upside next week, a bullish call spread avoids having to call the magnitude of any downside, and can offer higher probability of profits than an outright put purchase.
A wider 245+ strike call spread would reduce downside exposure further.
We saw a roll out of NVDA 20240816 127 Calls into NVDA 20240920 115 Calls.
Not the most successful roll, with over 10k lots adjusted, possibly an institutional hedge rather than a pure directional trade. Less appealing strikes compared to that iconic $2B 95/100 call spread roll.
In general, dealers seem to prefer rolling at major inflection points, signaling potential trend exhaustion. But the timing is rarely surgical in pinpointing exact turning points.
Thursday also saw outright NVDA Sept 119 call buying - a modestly bullish signal, though not necessarily advisable to chase here. More conservative strategies like selling out-of-the-money put spreads could make more sense at this stage.
Other NVDA flows included Aug 120-125 call spreads and Aug 110-115 put spreads for next week, straddling AMD's earnings.
Speaking of AMD, one large flow set an extremely wide range, selling AMD 20240816 160 Calls while buying the 180 Strikes - leaving over 14% upside yet undefined downside.
With the Crypto conference, COIN also saw accommodation for potential wild moves. Simple flows like the COIN 20240802 270 Call sale.
But also some broader put spread overwriting, like:
Sell COIN 20240920 300 Calls
Buy COIN 20240920 200 Puts
Sell COIN 20240920 150 Puts
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- KSR·07-27👍LikeReport