How option traders use rallies and trends to trade, and following those trades on Unusual Whales
As part of our weekly educational series
Hey all,
This is the Unusual Whales Team, and we are going to spend every week walking you through some trades of the week for free to help your trading!
These educational tutorials will be options or equities focused to help you understand why or how interesting and useful trades were made, and how to utilize and read the various tools on Unusual Whales.
Before we start, we had a podcast yesterday regarding the future of AI and the economics of AI, brought to you by Verses AI. You should check them and it out!
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In today’s issue, we’re going to take a look at some options traders who successfully took advantage of the market-wide rally this week. First, we’ll cover a call buyer on Disney, $DIS, and then we’ll take a look at a similar wave-riding trade on Intel, $INTC.
On Monday morning, 11/13/2023, we noticed some heavy ask-side action on the $DIS $90C 11/17/2023 weekly contracts. In the span of a minute and a half, over 13,000 volume transacted at the ask, for an average fill of $0.45 per contract. This set of orders also triggered a Repeated Hits alert, and below you can see the alert that fired. When these orders filled, $DIS traded at $88.84 per share, placing these $90C just $1.16 out of the money, with 4 days until expiration from the time of fill.
Prior to this set of orders, the total volume on the day for this chain was only around 4,000 contracts; this set of orders pushed that daily volume above 16,000. Granted, the open interest on this chain was quite high (22,669), and the total volume by close on 11/13 was 23,971. Given this high open interest, we had no guarantee that Monday’s volume was a new position–until the next morning. On Tuesday 11/14, we can clearly see the roughly 13,000 volume from this set of orders carried over into open interest–this is our confirmation that a new position opened.
On Tuesday, the $90C 11/17/2023 contracts reached a high of $1.82–already a profit of over +304%. However, the position was not closed on Tuesday–the trader held the full position, and on Wednesday as the market-wide rally continued, the value of this chain more than doubled.
During regular trading hours on Wednesday, 11/15, the $DIS share price had climbed as high as $94.57 per share; a +6.5% increase in share price in the two days since this order hit the tape. This share price spike placed these $90 calls more than $4 in the money. The contracts certainly reflected the jump– at HOD on Wednesday, our trader’s $90C were worth $4.66 per contract, a +156% gain from the day prior, and a +935% gain overall. Ultimately, by playing directionality on $DIS during a market-wide rally, our trader turned roughly $585,000 into over $6,000,000.
Before we get to the next trade, take a moment to check out our sponsor, Verses AI, which includes an ad and promotion by them!
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Verses CEO Gabriel Rene, joined Unusual Whales on our podcast to discuss the company and its goals, as well as the overarching topic of AI in tech and the markets. You can find the podcast episode on Spotify and Apple Pod!
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Our next trade began a few days prior to the Disney trade. On Friday, 11/10/2023, we noticed a rapid spike in volume on the $INTC $40C 11/24/2023 contract.
Once again triggering a Repeated Hits alert, 2,100 volume transacted at the ask of $0.39, spread out over 25 transactions overall for a total premium of $81,900, with 14 days until expiration from the time of fill. $INTC traded at $38.94 per share, placing these contracts just over $1 out of the money.
Fast-forward to Tuesday, 11/14– another set of orders hit the tape on the $40C, in similar sizing of 2,000 contracts, this time at $0.38 per contract. The total volume on 11/14 reached over 27,000 with an average fill of $0.36, and more than 18,000 carried over into open interest the following day.
During regular trading hours on Wednesday, 11/15, the $INTC stock price reached $40.84, placing these contracts $0.84 in the money. The $40C 11/24/2023 traded as high as $1.24 per contract. In the image below, we can actually see our trader exit their position on 11/15, at an average fill of $1.15 per contract; a +219% gain in 5 days.
Although our trader took profits ($0.36 average to $1.15 average, +219%), $INTC didn’t stop there. On 11/16/2023, the $40C was even deeper in the money with Intel trading as high as $42.59 per share.
The value of the $40C 11/24/2023 rose as high as $2.67 per contract; a +642% gain from the trader’s initial entry cost of $0.36. Granted, our trader was most likely gone before then, but still interesting to see how contracts move, nonetheless. (Note: There is never any shame in taking profit; sometimes additional gains are missed, but if you win on a trade, try not to dwell on things after your trade is over–on to the next one!)
So let’s recap these two trades:
$DIS $90C 11/17/2023: $0.45 → $4.46 | +935%
$INTC $40C 11/24/2023: $0.36 → $1.15 | +219%
To clear up some of the terminology used in this article that you may not be familiar with, there are numerous educational resources on Options Basics, Misconceptions, Greeks, and Finding and Tracking Flow over on the Unusual Whales Education page!
Today’s sponsor was VERSES AI; check out their Genius Beta Program to learn more about what Verses is working on in the world of AI!
Thank you as always for reading! I hope you find these types of articles helpful in your journey to learning how to read and interpret the flow and all the tools therein!
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. We have been paid to promote Verses AI via Winning Media in a onetime cash payment.
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