Unusual Options Activity in RIOT, NIO and MS

September 20, 2021

Unusual Options Activity Bretton Woods 092021

Is China Showing the World Who's Boss?

I read a good Bloomberg article over the weekend and this stuck with me:

“Two years ago, a 40-foot container cost less than $2,000 to transport goods from Asia to the U.S. Today the service fetches as much as $25,000 if an importer pays a premium for on-time delivery, which is a luxury. That’s translated into big money for container carriers, with the industry on track to post $100 billion in net profit this year, up from about $15 billion in 2020, says John McCown, an industry veteran and founder of Blue Alpha Capital.”

$2,000 to $25,000?!?!?!
I knew it was bad, but I was surprised to read how bad.

So, for the rest of the weekend, my mind kept coming back to this China situation.

China has blown up their stock market and almost all of the confidence investors have of investing in China.

I keep coming back to the “Why would they do that?”

And this small % probability that I‘ve been swatting away keeps coming back.

Is China trying to crash the whole market on purpose?

They know exactly what they’re doing, so WHY are they doing it?

Are they trying to crash the world market to show everyone (i.e. the U.S.) who’s really “The Boss”?

We keep thinking … Oh, China is having their own crash.

Yet, the whole world is knocking on their door asking if they will kindly ship more product to us.

They are the world’s factory.

And if the world’s factory closes, the world markets crash.

The End Game

Lastly, is this that chess move where they sacrifice a piece to move the game towards a checkmate?

Remember when and how the U.S. became the most powerful country in the world.

1944… The Bretton Wood Conference.

WW2 left everything in rambles and the U.S. Dollar became the world currency.

Maybe WW3 is economic warfare, and the Chinese are hunkering down, locking their borders, solidifying their allies, and warning their people to get back to their principles. 

Currency change only comes when there is carnage.

Did China just light the match?

Here are today’s 3 interesting trades…

UNUSUAL OPTIONS ACTIVITY

1. They Want to Buy More at THIS Level

2. NIO Puts Show up on Li Auto Warning 

3. Bitcoin Crashing and They are Buying Calls in THIS Stock?

Let’s get started...


UNUSUAL OPTIONS ACTIVITY MS STOCK

They Want to Buy More at THIS Level

Unusual Options Activity MS 092021

The banks have had a significant run over the last year. Fundamentally, they’re in good shape and buying back stock.

Morgan Stanley (MS) has been one of the best, and today’s options flow indicates big institutional buying at these levels. 

Before going into the big options trade today, I thought it would be good to get a longer-term perspective. Here’s a 3-year MS chart:

What Does the MS Stock Chart Say?

MS Chart - Options Activity 092021

The obvious comment is “Very Bullish Chart.”

MS is doing everything a strong stock should do … 5-10% dips, then new highs, and the two moving averages on a steady climb higher.

The only warning sign I see is today’s break of that 50dma. 

This didn’t seem to bother the person selling puts today.

Options Activity in MS Stock

Unusual Options Activity Scanner MS 092021

Someone sold 20,000 MS October 15th Puts at $1.31 this morning. That’s the equivalent of buying 2,000,000 shares at $90, or $180million of stock.

The person who did that has likely been buying stock for a while and wants more… lower.

I like seeing these trades to know where the larger buyers are really willing dig in. Then use it to potentially catch a turn in the stock if it gets there.


UNUSUAL OPTIONS ACTIVITY NIO STOCK

NIO Puts Show Up On Li Auto Warning

Unusual Options Activity NIO 092021

The Chinese EV names are weak today as Li Auto made an announcement that they would miss previous guidance on deliveries.

“Chinese EV Li Auto (ticker: LI) cut guidance for third-quarter deliveries Monday, saying it can’t get enough microchips. Li now expects to deliver about 24,500 vehicles in the third quarter, fewer than the roughly 25,500 vehicles it previously expected.”

LI, NIO, and XPEV are all down 6-8% on the day. Obviously, the Evergrande debacle doesn’t help. Real estate investments go bad and you’re not too excited about buying that brand new car anymore.

NIO options are active so I thought we would revisit the chart.

What Does the NIO Stock Chart Say?

NIO Chart - Options Activity 092021

The stock looks fairly weak underneath the 50 and 200dma.

The $31 level in NIO is now back on the table. I’ve been talking about that level for months.

If $31 is broken on big volume, you can easily see a drop to the low $20s and even $17.50.

Notice there’s a huge ABCD wave from January 2021 to May to July to today that’s also pointing close to the $17.50 -$20 level.

The NIO options activity is picking up.

Options Activity in NIO Stock

Unusual Options Activity Scanner NIO 092021

While there are both calls and puts trading almost equally, we haven’t seen these fast Put buyers for some time. And there are a bunch of them.

NIO Put buyers are present in all the weekly options through the October expiration. 

The next week $35 Puts, $34 Puts and the $30 Puts caught my attention.

The RR$ on the $34 and $35 Puts has risk-reward breakeven prices right near that $31 level, which NIO needs to hold.

We’ll see. 


UNUSUAL OPTIONS ACTIVITY RIOT STOCK

Bitcoin's Drop Draws Call Buyers in THIS Stock?

Unusual Options Activity RIOT 092021

Tell me where Bitcoin goes, and I’ll tell you where RIOT stock ends up.

RIOT is a bitcoin miner heavily leveraged to the price of the cryptocurrency. So, with Bitcoin under pressure today as risky assets become too risky, RIOT stock is feeling the heat.

The RIOT stock chart looks kinda risky. Take a look.

What Does the RIOT Stock Chart Say?

RIOT Chart - Options Activity 092021

RIOT stock has been in a $20 range for months after rolling down the “Momentum Mountain,” and that $22.50 level looks like the line in the sand.

This is one of those names that’s in my “$10 Club.” Unfortunately, I can’t tell you when it will get there.

The unusual options activity in RIOT stock is telling a different and more positive story.

Options Activity in RIOT Stock

Unusual Options Activity Scanner RIOT 092021

RIOT October $35 Calls were bid this morning and are drawing more option buyers in the early afternoon. More than 35,000 calls options have traded on the day.

Comparing the options volume vs open interest indicates that these are opening trades.

Also keep in mind that this Call option is outside the range where the Top 1% generally buy options (not in the shaded area). Could it be a short seller in RIOT using these Call options as protection? Maybe.

That said, I’ll patiently wait to buy Bitcoin at $14,000 and maybe RIOT stock at $10.

And if either one gets there, I’ll probably forget I said that.

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Best,
Felix

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