Unusual Options Activity in BABA, TSLA stock and GM

October 4, 2021

AAPL Chart - Options Activity 100421

I mentioned AAPL and tariffs last week.

Maybe you looked into it, maybe you didn’t.

Either way, don’t be fooled about where AAPL could go.

Yes, AAPL is an incredible company.

That doesn’t mean it can’t go down!

In the fall of 2018, “tariff wars” were spooking the market.

AAPL dropped 39% from October to early January. Just look at that chart!

40% from our recent highs gets us below $100.

Never say, “Never!”

UNUSUAL OPTIONS ACTIVITY

1. Relative Strength is a Great Sign!

2. Big Meeting, Big New Investor, Big Price Target

3. THIS Stock Price was "Impossible" 6 Months Ago

Let’s get started...


UNUSUAL OPTIONS ACTIVITY TSLA STOCK

Relative Strength is a Great Sign!

Unusual Options Activity TSLA 093021

We spoke about TSLA’s relative strength here last week. 

Looks like there was meaning behind it as they announced great delivery results while the rest of the world is struggling.

“For Tesla, the third quarter was another record. The company has delivered about 627,000 vehicles in the first three quarters of the year, up almost 100% compared with the first three quarters of 2020. Tesla is, essentially, running at full capacity while other auto makers shut plants due to lack of parts.”

How are they immune to the chip shortage?

No idea, but I bet the shorts are scrambling to find a good explanation.

What Does the TSLA Stock Chart Say?

TSLA Chart - Options Activity 100421

TSLA stock exploded on the open through $780 and even $800 but has retreated with the smackdown in big tech stocks today.

Our chart hasn’t changed much. $780 is still a big level in my book and a springboard to the old highs if the market decides to rebound. 

There’s also a 4-month steady uptrend in the making.

That 50dma above the 200dma is an added nice touch.

The bulls are clearly in control here.

The bears will need some negative announcement, higher volumes on a down day, and a strong move towards $740.

Options Activity in TSLA Stock

Unusual Options Activity Scanner TSLA 100421

The unusual options activity in TSLA continues to be in the weekly upside Call Options. The $800 weekly call options traded 80,000 times, while the $820 call options traded 50,000 times.

The option flows indicate that buyers came in early in the morning but have been selling them out as the day continues. 

The Risk-Reward Breakeven Price (RR$) ranges from $820-850. 

Earnings are in a few weeks.



UNUSUAL OPTIONS ACTIVITY GM STOCK

Big Meeting, Big New Investor, Big Price Target

Unusual Options Activity GM 100421

GM has a big investor meeting this Wednesday where senior management will present their growth strategy and highlight their software advantages for the future.

The stock also got a boost with the announcement that activist investor group Engine No.1 took a stake in the company. Engine No. 1 founder Chris James said this:

“We think that this can become a growth company again ... We think this stock could triple over the next five years, and that, for us, is something that gets us pretty excited. We think for the first time, they have the ability to gain an enormous amount of market share.”

“Triple” has a nice ring to it.

The chart looks like it’s trying to turn here a bit.

What Does the GM Stock Chart Say?

GM Chart - Options Activity 100421

GM stock has been struggling since hitting its $64.30 high in June. Supply-issues have taken its toll on the stock.

$53 was the first level of support that it broke through in August.

And then it tested $47, which happened to be the December 2020 top.

Recently, the stock has been trading better and rebounded above the 50dma.

Today’s announcement recaptured the 200dma and that $53 level.

Options Activity in GM Stock

Unusual Options Activity Scanner GM 100421

There’s good option activity in the GM weekly calls ahead of the event.  The $55, $56, and $57 Calls saw good option flows that were bought right out of the gate this morning.

Notice the Risk-Reward Breakeven Price (RR$) ranges from $57.60 to $59, which happens to be right above that gap lower in early August. Any good news that pushes GM stock higher could get the stock moving quickly through the $55-57 air pocket.



UNUSUAL OPTIONS ACTIVITY BABA STOCK

THIS Stock Price was "Impossible" 6 Months Ago

Unusual Options Activity BABA 100421

Like I’ve told you before… 

When trading options, you must consider the impossible.

China’s crackdown on their top tech names has decimated BABA stock. This 8-year weekly chart should give you some perspective.

What Does the BABA Stock Chart Say?

BABA Chart - Options Activity 100421

BABA stock is closing in on the 2019 lows near $130. Keep in mind it traded $60 in 2016.

The stock looks “cheap” on a fundamental basis, but this VIE structure used by Chinese companies makes owning the stock quite risky.   

It’s a falling knife. 

As trader, you rarely want to jump in to try to catch it.

Investing for the next 20 years is a whole different ballgame.

If that’s your game, you must get comfortable with owning a shell company that hopefully reflects the true value of BABA.

Unfortunately, someone thinks that may not be the case for much longer.

Options Activity in BABA Stock

Unusual Options Activity Scanner BABA 100421

There is some unusual options activity in BABA downside puts. And I mean wayyyyy downside puts. 

A buyer stepped in to buy 10,000 January 21st, 2022 $100 Puts for ~$3.80. That’s a 40% lower in the next 3 months!

If BABA is down 40% in 3 months, where will all the other Chinese stocks listed in the U.S. be trading?

At the $320 highs in December, a BABA $140 handle in October would have seemed impossible.

We’re at $140 now, just consider the “impossible” at $100 in 3 months.


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Best,
Felix

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