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Hey all,
This is the Unusual Whales Team, and we are going to spend every Wednesday walking you through some trades of the week for free to help your trading!
In today’s issue, we’re going to cover unusual options activity in Intel Corp, $INTC, and United Airlines, $UAL. One serves as an example of clean ask-side call action, while the other demonstrates the structure of a Synthetic Long multi-leg options spread.
We’ll start off here by taking a look at United Airlines, $UAL. On Tuesday, September 24th at 1:17:45pm Central time, a series of sweep orders hit the tape on the $55 call contract expiring on October 18th, 2024.
Originally spotted by Unusual Whales affiliate Anthony Sandford, the open interest on the contract sat at 2,156 contracts, and two of the sweep orders exceeded that open interest by themselves (2,533 and 2,381 respectively), meaning we can be confident that we’re looking at a newly opened position here.
One thing to note: we often speak about looking at the first few orders in a series of sweeps to help determine possible directionality. In this case, we see orders closer to the bid at the beginning. However if you look at the bid/ask spread, it’s quite wide, placing the first fill of $1.57 only slightly closer to the bid than the ask.
On top of that, we can see that these orders ascended in fill price–as the trader was unable to get contracts for that lower price, their sweep orders at higher prices continued to fill, eventually filling at the ask of $1.70 for the majority of the position. This seems more likely to be bought to open than sold to open.
During the trading session running into market close on September 24, the $UAL stock price rallied further, hitting a high of $53.25 for the session. The $55C 10/18/2024 contract rose to a high price of $2.05 per contract; a 21% gain from the average entry price of $1.69.
On the morning of Wednesday September 25th, the $UAL stock price bounced sharply to a high of $55.15 per share. The value of these $55C contracts tagged a new high of $2.76 per contract; a 63% gain. This trader turned $1.08 million into $1.76 million overnight. Nice trade.
Before we get to the $INTC trade, Unusual Whales has partnered with Tema ETFs and their $HRTS ETF, the GLP-1 ETF for the earnings of Eli Lilly, $LLY, & Novo Nordisk, $NVO.
The actively managed Tema GLP-1, Obesity and Cardiometabolic ETF aims to generate long-term capital growth via investment in GLP-1 and weight loss companies combating obesity and cardiometabolic diseases. Tema notes that obesity is on the cusp of a therapeutics revolution, while the leading cause of death, heart disease, witnesses a renaissance of therapies, driven by genetic insights and tools. Tema aims to utilize their team’s investment and scientific expertise to navigate the regulatory and financing risks of this secular theme.
CEO and CIO of Tema, Maurits Pot and Yuri Khodjamirian, joined Unusual Whales for a discussion on the GLP-1 and Obesity markets landscape; check it out!
The next trade we’ll take a look at came in the form of a synthetic long multi leg options strategy on $INTC.
As a refresher, A synthetic long is a bullish options strategy that involves selling to open put contracts (writing puts), and buying to open call contracts. The speculation made for this position is an increase in the stock price and an increase in volatility for the stock. As the stock price rises, the written puts lose value. Since the trader sold these to open, the more value the puts lose, the more of the credit they received goes into their pockets upon closing the position.
Likewise, as the stock price rises, the calls they bought will gain value. However, given this strategy’s utilization of shorted contracts (the puts), there is a high risk of ruin, because if the stock drops, the trader is at risk of losing ALL of the money they bought calls with, and of OWING money on the puts they sold. Synthetic longs and synthetic shorts are very dangerous strategies that should not be attempted by anyone without a deep understanding of options and many years of experience.
In the case of this $INTC trader, Unusual Whales team member snorlax_uw spotted the unusual options activity on the $21 put strike expiring on 12/20/2024 and the $30 call strike of the same expiration.
It’s notable here that the trader opened twice the number of contracts on the long call side than the short put side; the total credit received from the short put at $1.46 per contract on 10,000 contracts was $1.46 million, and the total premium spent by the trader on the long call for 20,000 contracts at $0.51 was $1.02 million. This means the trader received a credit of $440,000 to open this trade. This synthetic long, opened while $INTC traded at $22.51 per share, was an aggressive (and dangerous) play to the upside. This trader wants the value of the puts to diminish, and the value of the calls to rise.
On the morning of September 25th, this $INTC trader got exactly what they wanted. $INTC stock price rose sharply from their $22.51 entry to a morning high of $24.06 per share. Naturally, this caused a drop in the value of the put contracts; the $21P 12/24/2024 contracts dropped by about 29% to a low of $1.04 per contract. This means for the short leg of their synthetic long, if the trader closed the position, they’d have pocketed around $423k of the $1.46 million credit received.
On the other hand, as was desired with a synthetic long/bullish risk reversal, the value of the $30 call strike rose handsomely. From their entry of $0.51, the $30C 12/24/2024 hit a high of $0.83 per contract; a gain of nearly 63%. This marks a $640k gain on the short leg of the trade.
At the $INTC morning peak, this trader had the option to profit over $1 million overnight. There is some evidence of a partial position closure during the morning session when around 13,000 contracts transacted bid-side; open interest on the morning of September 26th will display whether some of these contracts closed. And remember, Synthetic Longs/Shorts/Risk Reversals have a high risk of ruin, and should not be attempted by anyone without a deep understanding of options and many years of experience.
Thank you as always for reading! Unusual Whales hosts an educational stream, LIVE, on YouTube EVERY TUESDAY, so be sure to check that out for live, on-screen education for options trading!
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.