Unusual Options Activity in SNAP, FB and FDX

September 22, 2021

Unusual Options Activity Delta 092221

Remember “Delta”? 

Not the option kind.

The one that was scaring the heck out of us for weeks.  

I came across this article last night describing a JP Morgan analyst’s apology for getting his Delta research completely wrong. He's probably not the only one and it likely explains why these re-opening stocks are trading so damn well.

Here are today’s Unusual Options Activity.

UNUSUAL OPTIONS ACTIVITY

1. This FAANG Name Is Under Pressure

2. One Stock’s Problem Is THIS Stock’s Opportunity

3. Does Bad Earnings Mean A Bad Stock?

Let’s get started...


UNUSUAL OPTIONS ACTIVITY FB STOCK

This FAANG Name Is Under Pressure

Unusual Options Activity FB 092221

We’ve documented the FB stock story for most of the big run, from $250 to a hopeful $400-410. It came damn close, right?

Today, FB announced that it underreported ad performance and blamed the iPhone privacy update: 

“Facebook estimated it underreported web conversions on Apple’s iOS by about 15% in the third quarter, noting there’s a “broad range” for different advertisers.”

15% is a lot.

Advertisers have migrated to the digital platforms for access, scale, and reporting. Reporting is incredibly important as it tells you where you’re winning and losing … instantly!

So, imagine seeing your ad numbers down 15% on FB and up 5% on SNAP, where do you switch your ad spend? 

Of course, SNAP.

The FB stock chart looked great, but the last couple of weeks tell a different story.

What Does the FB Stock Chart Say?

FB Chart - Options Activity 092221


After bumping up against the $384 level a few times, FB stock has u-turned in a hurry. The stock is down about 11% off its highs here at $344.80. 

Worse, you can see how breaking that 50dma really brought out the sellers on good volume. This did some technical damage to the chart.

Keep in mind, the stock was coming through a major uptrend. The more likely scenario is that FB stock finds a floor and then spends several months digesting all the news.

I would be looking for the stock to hold the $330-335 level, which is the July low and coincides with the 38.2% Fibonacci retracement level. In about 6 weeks, the 200dma will be at that level as well and should add some support.

Options Activity in FB Stock

Unusual Options Activity Scanner FB 092221

FB stock is seeing some unusual options activity today. The option flows are coming from both sides on today’s price drop. 

There is more Put buying today than usual in FB stock. And while most of the Put option activity is in the weekly options, a trade in December caught my eye.

A large institutional player came in this morning to buy 5,000 FB December 17th $340 Puts for $18.00 and sold 5,000 FB December 17th $350 Calls at $20. Comparing the options volume vs open interest shows that this was an opening trade.

They got paid $2 to do that FB option trade and are likely targeting FB stock to reach the $330-335 range I showed you above.


UNUSUAL OPTIONS ACTIVITY SNAP STOCK

One Stock’s Problem Is THIS Stock’s Opportunity

Unusual Options Activity SNAP 092221

We outlined Facebook’s mea culpa above. And while it seems to be just a reporting issue, advertisers float to the platform that is paying them for their advertising dollars.

Are advertisers shifting dollars to SNAP?

The SNAP stock chart looks very different from the FB stock chart.

What Does the SNAP Stock Chart Say?

SNAP Chart - Options Activity 092221

SNAP stock looks great. Frankly, it trades strong as well. 

September has been a tough month for the market, but you wouldn’t have noticed that if you were in SNAP stock. The relative strength is quite noticeable. 

After the sharp gap up on earnings, it appears that SNAP stock is simply digesting that move between $70 and $80 before making another move higher.

The flip side is whether or not the stock market makes another move lower. SNAP still trades around 20x sales. When the market goes down, the large institutions tend to throw the high Price-to-Sales names in the bin.

Options Activity in SNAP Stock

Unusual Options Activity Scanner SNAP 092221

There’s been some unusual options activity in SNAP this morning.  Buyers have stepped in for 14k SNAP November 19th $80 Calls paying about $5.50. 

Comparing the options volumes vs open interest offers a mixed signal on whether or not it was an opening trade.

After doing some digging in that option, I found this:

August 26th => Buyer of 14,000 $80 Calls
September 13th => Rolled those down to the $75 Calls

So, it appears he is back again looking for upside in SNAP stock price. How much upside?

Look at the risk-reward breakeven price. It’s $96!!

Now throw in $100 in the Target Stock Price and the pointer lands right on the $80 strike.

Can it get to $100 on earnings?


UNUSUAL OPTIONS ACTIVITY FDX STOCK

Does Bad Earnings Mean A Bad Stock?

Unusual Options Activity FDX 092221

FDX blew it last night. 

During the podcast days, I couldn’t express enough how important it is for management to simply do what they say they are going to do. 

No surprises. Be upfront. 

Great management tells you earnings will be $1.00 then they announce it was $1.05.

"Wow, great surprise. Ty."

When you say $1.00 and then 3 months later you come back with $0.90, investors start asking competency questions and analysts write reports like Raymond James did here: 

“We are downgrading shares of FedEx from Outperform to Market Perform after a disappointing quarter (despite solid top line trends), lowered guidance (only 90-days post establishing it), continued heady capex investments (despite a cloudier outlook), back-end loading of the guidance (a risky elixir), and more global uncertainty.”

Frankly, I am not sure how FDX messes it up. They (and USPS) are a duopoly competing against the U.S. Postal Service, which too often feels like they’re still using horses. They should be raising prices at double the rate they are going.

What Does the FDX Stock Chart Say?

FDX Chart - Options Activity 092221

Today’s drop quickly brings FDX stock to a big level at $230.

$320 to $230 is some drop for a name like FDX.

And there’s a lot of volume changing hands here. The sellers are the shorter-term momentum types and the buyers are likely the 10 to 20 year holders.

With the 50dma breaking the 200dma, FDX stock is probably dead money for at least another quarter.

Options Activity in FDX Stock

Unusual Options Activity Scanner FDX 092221

The unusual options activity in FDX is trading almost 5x the average daily options volume and is split 60-40 between Calls and Puts. 

The option flows have the same theme. There is mainly upside FDX Call selling and downside Put buying. The weeklies are seeing most of the volume but I would caution to stay away from those. FDX volatilities are still high after this drop and will likely trickle lower as FDX finds some floor.

I don’t think FDX is a bad long-term stock. But on a day like today, I start looking at UPS. 

If you read that linked article above, they may be making a rate increase announcement soon. And after this debacle, you better believe they are hearing the market’s opinion… Raise your rates higher! 

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Now go make some money!

Best,
Felix

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