What is IV Crush & How the Top 1% Avoid It
I get asked about IV Crush a lot.
So, I thought that I would create a good post for everyone to understand the mechanics of what is happening underneath the hood.
>>> "What is IV Crush & How the Top 1% Avoid It"
Let me know what you think of it. Does it make sense? Any questions?
And more importantly, let me know of a topic that you want to get more insight on.
Let’s get to it…
UNUSUAL OPTIONS ACTIVITY
1. Brand-Building Platform Looking for a Squeeze?
2. Big Announcement Has THIS Battery Stock Rising
3. Investors Excited About First-Time Profits
Let’s get started...
UNUSUAL OPTIONS ACTIVITY ATER STOCK
Brand-Building Platform Looking for a Squeeze?
Aterian (ATER) is an interesting <$500mm company.
ATER stock is getting a lot of press for the jump in price it’s had and the large short interest in the stock.
At first glance, the company tells a good story on their website.
ATER basically finds pockets of growing consumer interest through data analytics and then builds their own product, acquires a product, or partners with small brands to scale their business. With more products/partners, they improve their process and grow their platform, which creates better scale.
Brand values have gone way up over the years. The big companies are always looking for that smaller up-and-coming brand to buy. ATER ultimately offers them a marketplace for brands they could buy, either their own or one of their partner brands.
If they find 1 great company, it can be worth $100s of millions of dollars, or even billions.
ATER stock looks like an ecommerce company with a venture capital bent to it.
Take a look at this chart:
What Does the ATER Stock Chart Say?
After a long drop from $49 to $3, ATER stock volume has picked up significant lately.
This volume pickup coincides with a rise in the short interest to almost 6.7million shares.
While ATER shares outstanding are 35.7 million, the float is only 23 million. The low float vs the high short interest is what attracts the WSB crowd.
A good and easy story to tell plus a significant short interest with a little options flow sprinkled on top might just get ATER going higher.
Options Activity in ATER Stock
There’s unusual options activity building in the October Calls today. The option flows are heavy in most strikes ranging from $12.50 to $30.
The highest volume options trades are in the ATER October $15 Calls for as much as $3.00. The Risk-Reward breakeven price for those Call options is pointing to $23.57, which means call buyers are looking for north of $25.
In 4 weeks!
Keep this one on your radar.
UNUSUAL OPTIONS ACTIVITY QS STOCK
Big Announcement Has THIS Battery Stock Rising
QuantumScape (QS) made an announcement today with an SEC filing that is getting investors excited again.
“(The company) recently signed an agreement with a second top ten (by global revenues) automotive original equipment manufacturer (“OEM”) in which the OEM committed to collaborate with the Company to evaluate prototypes of the Company’s solid-state battery cells, and to purchase 10 MWh of capacity from the Company’s pre-pilot production line facility (“QS-0”) for inclusion in pre-series vehicles, subject to satisfactory validation of intermediate milestones… The OEM has already evaluated early cells, and the intermediate milestones consist of more advanced prototypes of the Company’s cells, expected to be delivered before QS-0 starts production in 2023.”
The company already has a partnership with Volkswagon so this would be the second top OEM under wraps.
Look, QS stock is interesting because there's passionate investors on both sides.
One side thinks the technology that QS is developing will never make it to full scale production.
The other side says, “Give it time.”
From the looks of the QS stock chart, it’s easy to tell who's winning.
What Does the QS Stock Chart Say?
QS stock declined sharply from the $130+ high it reached back in late-December.
"Weak" is an understatement. The stock has traded below the 50dma since April, except for 3 days in June.
The good news is that today’s 14% price jump has helped QS stock recapture the 50dma on good volume. It’s the second time in the last 3 days that QS stock traded more than 10 million shares.
QS Call options didn’t waste any time to get active this morning.
Options Activity in QS Stock
QS Call options are outpacing Put options by a 4 to 1 margin today.
The weeklies are active, specifically in the QS October $24 and the $25 Calls. More than 19,000 Calls have traded in each strike. These buyers are looking for a $27-28 print in the stock.
I think this announcement is a good development for the company.
But I still think there’s a long while before we get some real answers.
Either the battery works and QS is a Trillion dollar company like the bulls believe, or it’s not and the valuation is still too high here.
The market is not giving it a high probability of success right now… and maybe that’s the opportunity.
UNUSUAL OPTIONS ACTIVITY UBER STOCK
Investors Excited About First-Time Profits
UBER made headlines this morning saying they would report an adjusted EBITDA profit in the fourth quarter, the first in its history. The “adjusted” is likely for the hundreds of millions of $s UBER spent to balance the supply – demand of drivers vs. customers.
Here’s the CEO from his CNBC interview:
“What we did was, early on we identified our need to bring on more drivers onto the platform. So, in the second quarter, we really leaned into supply, especially in the United States, to reinvigorate our driver base and grow our driver base in the U.S… We’re seeing that now, the benefits of that early investment, in Q3.”
Hopefully, the “adjusted” millions are really just a one-time thing.
Either way, Wall Street loves the news.
What Does the UBER Stock Chart Say?
The sellers tried to crack UBER stock this week. Ultimately, the big institutional buyers we noted at the $39 level won this battle.
UBER stock is up almost 13% on the earnings news and climbing.
It’s recaptured the 50dma and the $43 lows of March on tremendous volume.
The 200dma at $50-$51 becomes the next UBER Target Stock Price, where there will likely be some resistance.
Options Activity in UBER Stock
Options flows are significant today on the breaking news.
Almost 700k UBER options have traded so far, which is 4x the average traded options volumes at this time of the day. Call Options outnumber the Put Options by more than 2 to 1.
Keep in mind, Call Options are mixed as there is some profit taking going on along with new Call buying, especially in the front week. The highest options volume strike is the UBER September 24th $43 Calls. Comparing options volume vs open interest shows that these are buyers who are opening new positions.
Look, UBER is one of the biggest data tech companies in the world that has been held back for obvious and real reasons.
If the Street is getting past the employee classification issues and focusing on THIS, then UBER stock has room to run.
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Best,
Felix
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