Unusual Options Activity in SNAP, NIO stock and MSFT

November 22, 2021

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I’m excited for you because this one will be awesome.

First, you’ll learn about one of the biggest misconceptions using Unusual Options Activity and why good data can help you.

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1. Is NIO Finally Ready?

2. How to Play a MSFT Pullback.

3. SNAP Put Seller. Do I know YOU?

Let’s get started...


Is NIO Finally Ready?

Unusual Options Activity NIO 100721

A few developments since Friday’s close have given NIO a boost today.

On Friday, NIO completed its previously announced at-the-market offering of 53.29 million ADSs and raised $2 billion in gross proceeds. This was announced back in early September. The completion lifts an “overhang” on the stock.

Looking ahead, the market will be focusing on NIO's deliveries for November, which are expected to be released in early December.

In addition, the Chinese EV company announced over the weekend that it would take formal reservation in mid-January for its much-anticipated ET7 model. Excitement should rise leading into NIO Day on December 18th.

What Does the NIO Stock Chart Say?

NIO Chart - Options Activity 112221

NIO stock is in a 1-year digestion period, with $32.50 being the “line in the sand” throughout the journey.

The Bulls need NIO to break through the down-sloping trend line in order to get some momentum. A break above $45ish can quickly run to $55.

And while it’s above the 50dma, the Bulls want NIO stock to recapture/hold the 200dma.

Failing at the 200dma will only embolden the Bears here.

Options Activity in NIO Stock

Unusual Options Activity Scanner NIO 112221

There’s unusual options activity in NIO across all expirations. Calls are trading 4 to 1 vs puts with the stock up 6%. Specifically, there is call buying in the November 26th $41 through $45 Calls.

December and January are also seeing action in the $45 and $50 Calls.

I like the January expiration better.

Pick the Right Option


How to Play a MSFT Pullback

There is no doubt about it - MSFT is a beast.

Listen to Wells Fargo on their initiating coverage of MSFT at overweight:

“Even after having become one of the largest companies on the planet ... we still see a bright future ahead for Microsoft, driven by continued growth prospects in huge categories of IT spend ... ability to further monetize strong positioning in multiple end markets ... and a financial profile that continues to exhibit durable growth and margin expansion.”

A little late, but nonetheless, welcome to the party Wells Fargo.

MSFT’s chart is incredible.

What Does the MSFT Stock Chart Say?

MSFT Chart - Options Activity 112221

And not just because it goes up, up, and then up.

Every $10 move higher over the last 4 months has been about $100Bn in market capitalization. Just Wow!

There's no doubt that the Bulls are giddy with MSFT up more than 50% for the year.

It’s hard to be Bearish, but today’s action on Wells Fargo’s positive comments may (and I say this with very little conviction) signal a tired stock.

A 3% move up, then right back down does say something.

Also, look at the distance between the stock and the 50dma. It’s getting a bit off course, no?

Options Activity in MSFT Stock

Unusual Options Activity Scanner MSFT 112221

I would also add that many Call buyers this morning got trapped up there. Buyers were swarming the MSFT November 26th $345, $347.50, and $350 Calls out of the gates.

December and January Calls were also pick up.

Earnings are likely not until February.

I'm not in the business of picking a fight with the strongest stock on the board, but here’s a trade that might make some sense.

Buy 1 MSFT January 21st $340 P
Sell 2 MSFT January 21st $320 P
Net-Net = You pay $1.
Breakeven = $301.

You profit between $301 and $339. If it lands at $320, this trade is worth $20. Below $301, you lose $1 for $1 on 100 shares.

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SNAP Put Seller. Do I Know YOU?

Unusual Options Activity SNAP 092221

I like SNAP.  It’s doing all the right things.

I look at it every day, but just can’t seem to push the buy button.

Valuations ultimately mean something.

If you are paying attention, the market is starting to pay attention to valuations.

They are rethinking the “fantasy.”

SNAP is great, but it trades at a high price to sales multiple.

Look at that chart.

What Does the SNAP Stock Chart Say?

SNAP Chart - Options Activity 112221

After being up nicely, it only took 6 weeks to crush the stock back to flat on the year.

Below the 50 and 200dma is always a tough spot.

Now, SNAP stock is nearing that all-important $47.50 level.

A break there and… well, you don’t want to hear my thoughts on where it can go.

It could get ugly.

So, the Bulls want to see those long-term BIG institutional holders step in and do what they do best… buy, buy, buy. Because if there ever was a time – It’s Now!

On the other hand, the Bears keep asking: 

  • “Where are the earnings?”
  • “Whaaaat Price to Sales?”
  • “Don’t you realize Apple destroyed the advertising model.”

Which leads to an interesting trade in the options market.

Options Activity in SNAP Stock

Unusual Options Activity Scanner SNAP 112221

While there is a back-and-forth fight with equal amounts of puts and calls, this one trade for next week is a big one.

Someone sold 31,000 SNAP December 3rd $44 Puts at $0.24. So, they took in $744,000 today and now risk owning 3.1mm shares of SNAP at $44.

It reminds me of a client we had a Bank of America during the 1999 bull market. He also popped up again in 2008. This client would sell millions of Puts and collect around $500,000 -$1,000,000 every 2 weeks.

You want to know what happened to him?

He made a small fortune.

And then he blew up. Both times.

Wall Street loves nicknames. There’s a VIX call buyer that they call “Fifty-Cent.”

This Put Seller who sold the "teenies" was called … “The Unabomber.”

We are in a raging bull market (maybe a bubble?).

The Unabomber is just in time.

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