Unusual Options Activity X, M, BABA

August 19, 2021

ZH Gamma Article

Crash Next Week? Learn Something Right Now!

Here’s a Lesson to start.

First, I want you to (try to) read this article and realize this is what a Volatility Trader thinks about. 

When I sat at Bank of America with a team of traders committing Billions of dollars in capital facing the biggest investors in the world, that’s what my co-workers and I discussed. All. Day!

It’s literally a 5D Chess game.

You DO NOT have to completely understand this stuff. Trying to get real meaning from it would take years of studying, and then years of being a Volatility Trader.

Let me be your interpreter…

Big customers have been selling a lot of near-term options to the market-makers (“dealers” or Investment Banks). Many of these options expire tomorrow. The “range” that they sold them was around $440-$450 in the SPY (they give futures levels in the article).

The Market Makers bought these near-term options from the customer and sold long term options into the market (or they had some of these long-term options on their books already) as a hedge.

The Big customers have sold so many options, that it forces the Market Makers to create this “range” bound trading environment due to the day-to-day hedging they have to do. Hence, the non-movement over the last few weeks.

I’ve referred to this “range” bound trading as “rubber bands” around a certain level. If the price moves too far away, it’s pulled back toward the range.

Until it doesn’t.

If it moves too far away from that range and gets closer to expiration, the pull effect into the center of the range can lose its grip. That’s what this article is trying to say…

Not only is it losing its grip near SPY $435, but most of the “rubber bands” will disappear at this week’s expiration.

What Happens Next?

Net-net. It’s a moving target. 

I think it’s likely to close tomorrow at SPY $439-441. Just a guess.

Expect a bigger move next week.

There’s a lot more nuances in that article… But what I told you is the gist.

Now, let’s get to today’s UOA…


1. How HIGH Can This Stock Go After Today’s Move!

2. This Sector Taking a Beaten Today. Time to Buy?

3. THIS Stock is Crashing. Here’s How to Play it!



How HIGH Can This Stock Go After Today’s Move!

Great earnings from Macy’s today. They raised guidance and announced a $500mm buyback, giving us more confidence that the stock is too cheap. Here’s a good recap:

The department store chain also hiked its outlook for 2021, heading into the back half of the year. Despite the uncertainty from the pandemic, Macy’s said its turnaround strategy is working and drawing in new shoppers.

Also, watch this interview with the former CEO. He talks about M and the AMZN announcement today.

The chart looks great…

What Does the M Stock Chart Say?

M Stock Chart 081921

I like seeing that big move today on volume. Several times over the last 6 months, we’ve seen a sharp rise in M stock only to give it all back within a week. The HUGE volume tells me this time is the charm.

M Active Option Contract to Watch

M Unusual Options Activity 081921

Profits were taken in some of the weeklies Calls this morning. However, a huge chunk flowed back into the September 17th $21 Calls. 50k were bought today for $1.40. There continues to be more on the tape. The RR$ is signaling above $24.30. 

I like the way that sounds. 

Besides the fact that we’re long this name in Winning Picks Premium, I had to smile at this announcement from the company. Ty, Macys!


This Sector Taking a Beaten Today. Time to Buy?

Steel Industry

Steel stocks and industrials are taking a beating today. Zerohedge has a good recap although keep in mind they always come from “we-are-crashing-right-now” mentality. 

“Since mid-July, iron ore futures are down more than 33% in Singapore to the lowest level since December. The catalyst for the downdraft in prices is due to Chinese steel output, and consumption is expected to slide in the coming months due to government authority's pollution curb on smelters.”  

After reading the article, you probably want to sell everything.

Keep in mind, China is trying to pullback on steel production (which is good for steel prices), in part, because their under tremendous amount of pressure to make cleaner steel. If they want to be THE Power player on the world stage, which they do, they need to be talking a bigger “Clean Energy” game.

I also think steel is one of those commodities that will be hoarded by each country to use themselves. The export taxes being placed by Russia, China etc. point to that. U.S. will be no different.

Anyways, here’s the U.S. Steel (X stock) chart…

What Does the X Stock Chart Say?

X Stock Chart 081921

That $30 range in X stock is now clear resistance. The 50 dma is at $25. And the lower range is $20.50. One day doesn’t make a trend, so this now becomes a wait and see for the next few days.  

A 50% retracement from the recent $10 move is not out of the question and gets us back to the 50dma.

X Active Option Contract to Watch

X Unusual Options Activity 081921

In the X stock options, there’s a lot of back and forth today, primarily front week activity. But I’d like to point out these X September 17th $30s and $32 Calls.  

The X September 17th $30 Calls were bought 10,000x last Friday at $1.43. 

Yesterday, some of those Calls were sold between $2 and $2.50, then rolled into the $32 Calls.

On the move down today, it appears both ($30s and $32s) were sold. With 1-month options this makes sense as time begins to work against you.


THIS Stock is Crashing. Here’s How to Play it!

BABA logo Trade Idea

Oh Boy! Here we go again. Remember this?

There’s a similar set-up you see in that video. So, give me a down move tomorrow morning and I may have to jump in. This is more trading than anything fundamental.

We all know the “China beating down its own stocks” story. 

And yes, the stock is cheap. But people are asking: “What exactly do I own with this ‘stock’?”

If you are late to the China–Cayman Island connection, then I would start here then here

No doubt, it’s ugly out there.

What Does the BABA Stock Chart Say?

BABA Stock Chart 081921

BABA stock is collapsing on good volume. Not much more to say.

BABA Active Option Contract to Watch

BABA Unusual Options Activity 081921

And with the options flow, frankly, there is Unusual Options Activity in BABA on both sides of the table.

While the highest options volume is in the weeklies, I’m looking at these BABA Call Spread Buyers in the September 17th expiration. It appears they’re getting long the $160 to the $175 Calls. And selling the $185 to $195 Calls. 

It’s been on my radar.

And right now, I’m just trying to sit on my hands before buying next Friday Calls.

Now go make some money!



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