Peloton, PTON, buyout Unusual Options Activity BEFOREHAND (and highlighted before). How to spot unusual trades!
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Hey all,
This is the Unusual Whales Team, and we are going to spend every Wednesday (or Thursday due to FOMC) walking you through some trades of the week for free to help your trading!
In today’s issue, we’re going to cover some unusual options activity in Peloton Interactive, Inc. $PTON. We noted activity in the days leading up to news for the company.
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The journey of our trade began on May 6th, 2024, when a slurry of ask-side transactions hit the tape for the $PTON $4 call expiring on May 10th.
Here we have the contract overview for the $4C 5/10/2024 contract. In the morning, nearly 1,200 contracts transacted, but the fills were a bit all over the place (note the green/blue/red bar, indicating there were several ask, mid, and bid side fills). However, as the day progressed, more volume continued to flow in, almost entirely at the ask price.
Over the course of the day, 6,554 contracts transacted, with 70% of the entire day’s volume falling at the ask, with an average fill on the day of $0.05 per contract. Most of the ask-side flow, however, filled in a range of $0.06 to $0.08 per contract while the underlying $PTON stock price traded in a range between $3.50 and $3.67 per share.
In the contract look-up, we can see that 3,760 of the May 6th volume carried over into Open Interest. Boom, we’ve got a new position. But the morning of May 7th is where things got interesting.
Peloton Interactive, Inc. $PTON, a fitness company who experienced massive moves during the COVID-19 Pandemic while many citizens were staying at home, aims to refinance its debt. Notably, $PTON has also experienced 13 straight quarters of reported losses.
Last week, $PTON announced its plans to restructure, and expects to reduce annual expenses by over $200 million by the end of 2025.
On Tuesday, May 7th, CNBC reported that several private equity firms have been considering a buyout of the fitness company. Given $PTON has gone from its market cap high of over $49 billion in 2021 down to just $1.3 billion in 2024, I suppose it’s not the biggest surprise that Peloton has become a hot target for acquisition. Nonetheless, once the CNBC report dropped during pre-market trading on May 7th, the market reaction was instantaneous.
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Back to the trade!
$PTON shares soared over 18%, reaching a pre-market high of $4.52 per share. At the market open, $PTON was still trading above $4. Naturally, the options contracts reflected the ripper.
At open, the $PTON $4C 5/10/2024 traded at $0.26 per contract right out of the gate. Minutes later, the contract reached new highs of $0.39.
Throughout the day, there was evidence of positional closures. Right away in the morning, roughly 1,000 contracts transacted at the bid of $0.26. Some other ask side flow sprinkled in there, as well, possibly late-stage chasing, or wonky fills for those exiting their positions.
More bid-side flow occurred throughout the day, ranging in price from $0.20 to $0.10. On Wednesday, May 8th, over 1,000 contracts fell off the Open Interest, which further displays to us that some profit taking occurred following the news on May 7th.
Notice in the image above how we saw high volume, nearly 15,000 contracts’ worth. However, the Open Interest fell the next day. This confirms to us two things: First, the high volume transacted on May 7th consisted of intraday transactions. How do we know that? Because the Open Interest fell the next day–if it had risen, we’d be looking at new positions; but it didn’t rise, it fell. This leads us to the other confirmation – Someone from the original positioning we tracked likely took profit on their trade.
It would be a bit too speculative, given the vast amount of volume transacted, to say for certain whether or not this trader pocketed max gains on the contract. But for the sake of closure, let’s assume the 1k volume that fell off the open interest was closed on that volume candle right in the morning.
$PTON $4C 5/10/2024 | $0.07 (avg) → $0.26 | +271%
At the time of writing, $PTON traded at roughly $3.94 per share, and the value of these contracts, now so close to expiration, has fallen to around $0.09 per contract. Hopefully some of them took their gains!
Thank you as always for reading! I hope this article helps you understand how to speculate on options flow that suggests an intraday trade! Be on the lookout for more guides, walkthroughs, and Education on the Unusual Whales YouTube channel!
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NOTE: This post is not financial advice. The stock market is risky, and any trade or investment is expected to have some, or total, loss. Please do research before any trade. Do not use this information for investment decisions. Check terms on site for full terms. Agree to terms before considering this information.