Something incredible has just happened.
For the first time, options trading has surpassed stock market trading by volume and may very well have caused the massive surge in stocks over the past 6 months.
“Trading volumes of single-stock options exceeded those of regular shares for the first time during July” -Goldman Sachs
Chart Source: Bloomberg News.
But that’s not all.
Because options are now taking a leading role in the markets, some analysts are now saying that options buying might actually be forcing market makers to buy the shares of underlying stocks as a hedge.
Which means the options market may very well now be a leading indicator.
Case in point: Apple which has seen its shares double in the past 5 months, has seen too much call option-buying activity that market makers (the firms selling individual investors all those calls) have been forced to hedge by buying AAPL stock. Options are now a leading indicator.
And the same story applies to other big names like Tesla (TSLA) and Amazon (AMZN).
Your Bottom Line: What this means is that in this market, options traders are in charge. Brokers are being forced to follow their lead and hedge each bullish (or bearish) bet.
It’s going to pay to keep a close eye on which stocks are seeing unusual options activity.
With this revelation in mind, here are stocks seeing unusual options activity in the past few trading days:
Option-Volume Increase Stock #1: SPDR Gold Trust (GLD) is seeing a big increase in call volumes this week as both gold and silver have seen a resurgence after selling off through most of September. On Tuesday, September 29 for example, one trader bought a whopping 10,000 contracts for the December $190 GLD calls and kept on buying by adding $200 strike, and $210 strike calls for a total gamble of $750,000.
Option-Volume Increase Stock #2: Advanced Micro Devices ((AMD) is getting some attention this morning as talking heads on CNBC are speculating that AMD should benefit from price increases from competitor Nvidia.
Option-Volume Increase Stock #3: Energy Transfer (ETP-E) is a potential bearish bet using put options with increased buying by 500% of out-of-the-money put options yesterday. This may come as no surprise as the stock itself has been sliding down for the past week.
Until Next Time,
The BLI Team