Option Trading while SPY, SPX, and QQQ all reach ATHs
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Options Traders Take Advantage of the Market Rally and All time highs
In today’s issue, we’re going to take a look at an unusual options trade that capitalized on the upward movement in the markets. As $SPX and $QQQ continue to tag new all-time highs, traders have taken advantage of this sentiment with options trades, and in some cases rolled their contracts in an attempt to take off another bite of the uptrend.
Let’s start here with options activity spotted on the SPDR S&P 500 ETF Trust, $SPY.
On January 18th, 2024 at 08:46am CST, we noted repeat action on the $SPY $480C 2/2/2024. Throughout the day, over 88,000 contracts transacted; however we’ll be focusing on around 33,000 contracts here. While $SPY traded at $473.79, those roughly 33,000 contracts transacted at the ask, for an average fill of $2.42 per contract, and a total premium of roughly $7,986,000.
The market continued its upward trajectory over the following days, bringing these contracts to new highs each day. On 1/19, the contracts reached a high of $6.53; on 1/22, they hit $8.13 per contract. On January 23rd, the market experienced a small pullback, bringing this contract down as low as $6.61 per contract, but the trader held onto their position. On 1/24, the trader must have hit their profitability goal, because we noted evidence of an exit on the position (but not just an exit; we’ll get to that shortly).
On the morning of 1/24, while $SPY traded at $487.57 (putting the $480C $7.57 in the money), flow nearly the exact same size as the original entry hit the tape at the bid, transacting at $9.33 per contract. Given the nature of this at-bid flow, speculation is that the trader exited their position (OI will confirm, but this seems highly likely as-is). Our trader made a 290% return on their position, for a profit of roughly $22.5 million. Remember I mentioned the trader didn’t stop there? When this $480 contract closed, it was paired with another contract in a multi-leg transaction.
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Now let’s roll back into the $SPY roll.
Upon their exit of the $480C for profit, our trader took those profits and rolled them into the $490C 2/16/2024 contract. 48,942 of the $490C traded in this multi leg transaction at the ask for an average fill of $4.94 per contract, and a total premium of around $24 million.
Remember our trader profited roughly $23 million on the $480C from a $7.68 million buy-in; so in this case, our trader has not technically profited on their initial trade, as they rolled the entirety of their profits into this new position.
At the time of writing, the $490C traded as high as $5.52 per contract, meaning our trader is profitable on this new position. There’s no evidence as of this publication of any exit from this position, so we’ll monitor it more as we move forward!
Let’s recap:
$SPY $480C 2/2/2024 | $2.42 → $9.33 | +290%
→ rolled profits into ←
$SPY $490C 2/16/2024 | $4.94 → $5.52 | +12% (unrealized)
Given our trader rolled their position, while this new position is still open they have not technically pocketed any of their profit yet. However, as things stand given the $480C trade and this new $490C position, the trader is roughly $2.8 million in profit on the new position, and $25 million overall.
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! Also checkout our Portfolios feature to follow any member of Congress’s portfolio as they trade.
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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!
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