Recently, Chinese assets have been making notable moves in the market.

Last Monday (December 9), the Nasdaq Golden Dragon China Index closed up 8.54%, marking its largest single-day gain since 26th September. Signs of capital flows betting heavily on China ETFs began emerging as early as late November, with traders making significant bets on call options.

For example, on 2nd December, a trader purchased approximately 210,000 call options for the Direxion Daily CSI 300 China A Share Bull 2X ETF ($CHAU), spending an estimated $55 million at average prices. This level of activity stands out sharply, as $CHAU typically sees very little options trading.

Except $CHAU, other China-related ETFs like $YINN and $FXI have also shown unusual call option activity. According to the latest open interest (OI) data, traders appear to have closed only a small fraction of their positions, leaving the majority still open.

This article explores the capital flows behind the call options for $YINN, $CHAU, and $FXI, offering a closer look at the potential signals these trades reveal and retracing the steps of the "smart money".

1. $YINN

According to TradingFlow's Option Chain Explorer section, the $YINN call options set to expire on 16th January, 2026, with a strike price of $27, showed significant activity on 29th November. Specifically, open interest (OI) surged by over 90,000 contracts that day (kindly note that #OI DIFF indicates changes from the previous trading session).

Further investigation via TradingFlow's Contract Level Explorer reveals a steady inflow of large capital into these call options. As of this writing, based on the current OI data, traders have closed only a small portion of their positions, leaving the majority still open.

2. $CHAU

The first notable signs of large-scale bullish bets on $CHAU call options emerged on 3rd December, later than the unusual activity observed in $YINN.

Data shows that the $CHAU call option contract expiring on 16th May, 2025, with a strike price of $15, experienced a single-day open interest (OI) increase of up to 200,000 contracts. Similarly, as of now, a significant portion of these contracts remains open and unclosed.

3. $FXI

Several $FXI call option contracts have shown unusual activity. For instance, the $FXI call option expiring on 20th December, 2024, with a strike price of $32, saw a sharp increase in open interest (OI) on 29th November, adding 9,757 contracts—significantly higher than the previous daily changes, which were typically below 500.

After the initial surge in large-scale positions for this contract, additional notable inflows were observed on trading days such as 2nd December and 6th December. As of this writing, a significant portion of these contracts remains open, with only a small fraction closed.

Using the average price of this contract as a reference, traders who added nearly 10,000 contracts on 29th November could have seen unrealized gains exceeding 550% by 9th December, assuming the newly opened positions remained unclosed on that date. However, as of last Friday’s close, most of these positions are still open and are likely now in a losing state.

This activity has drawn significant market attention to the OI values of $FXI and the previously mentioned ETF-related call options. Are traders gearing up for the next leg higher? Stay tuned with TradingFlow for their next moves!

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Disclaimer: This article is for informational purposes only and does not constitute investment advice. Before making any financial investment decisions, please ensure you thoroughly understand all aspects of the information and conduct your own research.

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Recently, as Trump’s popularity surged on the prediction platform Polymarket, a wave of Trump Trades has swept the market.

Leading the charge, Trump-linked stock Trump Media & Technology Group Corp (DJT), skyrocketed with the rally beginning on 24th September and peaking intraday at $54.68 on 28th October, a remarkable gain of nearly 350%.

During DJT’s recent price surge, TradingFlow team identified the strong short-term bullish trend early on, based on unusual options data movement, with the trend confirmed as early as 11th October. At that confirmation point, there was still more than 100% upside potential until DJT’s stock reached its record high.

Now, let's take a look back at how our team detected this explosive rally signal by analyzing changes in Open Interest (OI). Using TradingFlow's Option Chain Explorer data, we observed a sharp increase in OI for DJT's bullish options contracts, with nearly 50,000 open contracts, suggesting a substantial inflow of capital betting on a major DJT rally.

Then, looking further at the related call options showing significant OI changes on the Option Chain Explorer:

· Strike price of $25, Expires on Nov. 15, 2024

Data shows that on 10th October, a large volume of new call buy orders opened, betting on a rise in DJT (note: the OI DIFF value updated on 11th October reflects the previous trading day's change). These positions were gradually closed over subsequent trading days. By 30th October, when DJT experienced a pullback, the OI for this contract was only about 15% of its 11th October peak."

· Strike price of $25, Expires on Nov. 15, 2024

The inference logic for the $35 strike call option contract is similar to the one mentioned earlier, though the exit level for this contract has been less extensive than the $25 strike call option with the same expiration date. This might be because there is still some time until the U.S. election, and traders have retained some positions as a strategic hold.

Interested readers can check out the specific contract activities on the trading day by exploring the data section of TradingFlow’s Contract Level Explorer. Subscribe our blog to catch more trend signals together!

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Disclaimer: This article is for informational purposes only and does not constitute investment advice. Before making any financial investment decisions, please ensure you thoroughly understand all aspects of the information and conduct your own research.

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If you missed it, please refer to: The Rebound of Chinese Concept Stocks: Key Insights from the Options Market.

As the market fluctuates, we’ve observed some unusual activity in the options market including three Chinese concept stocks: Tiger Brokers (TIGR), Alibaba (BABA), and Pinduoduo (PDD). Hope this article could help you to identify and interpret key information within the options data, providing valuable insights for decision-making.

On 30th September, an unusual movement was observed in the $TIGR call options contract with a strike price of $6 and an expiration date of 17th January, 2025. About one hour after the market opened, a surge in buy orders pushed the contract volume close to 9,000. According to TradingFlow data, the trader executed the order near the day's high at approximately $1.03, bringing the total cost of the options premium to nearly $900,000.

Later, as $TIGR's stock price weakened by midday, the price of the $6 strike options contract, expiring on 17th January, 2025, also dropped, hitting a low of $0.75, marking a decline of over 27% from the trader's entry price. However, by the end of the trading day, no further large transactions were recorded for this contract.

Data updated on 1st October shows that the Open Interest (OI) on 30th September increased by 11,058, confirming that the large transaction mentioned above was most likely a new position, and it remains open.

In the following trading days, the price of $TIGR continued to surge. Based on the Open Interest (OI) value of the aforementioned contract, it is highly likely that the trader who opened the position on 30th September is still holding it. As of the updated average price on 4th October, this trade may have yielded a profit of over 460%.

The unusual options activity for Pinduoduo appeared on 24th September, with the $PDD call options contract expiring on 15th November, 2024, and a strike price of $115. A large volume of contracts was executed at the ask price of approximately $4.15.

Similarly, based on the change in Open Interest (OI), this trade was a new position opened on 24th September. As of the most recent trading day (4th October), there is no data indicating that the trader has closed the position. Calculating from the change in the average contract price, this position has already gained 600%.

During the early session on 1st October, two large buy orders for the $BABA call options contract, expiring on 11th October, 2024, with a strike price of $116, flooded the market. The total trading volume was approximately 7,500 contracts, with an average execution price of about $2.01.

Still considering the change and absolute value of Open Interest (OI), it appears that the trader executing this operation continues to hold the position and has not closed it. Based on the average contract price on 4th October and the trader's entry cost, the profit margin has reached 70%.

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Policy Support and Federal Reserve Rate Cuts: Multiple Catalysts Driving the Rebound of Chinese Concept Stocks

The recent broad surge in Chinese concept stocks has been fueled by both the Federal Reserve’s interest rate cuts and multiple supportive policies from the Chinese government. These factors combined have led to a short-term market recovery for Chinese stocks and may lay the foundation for future valuation corrections.

（Source: Tradingview, data as of 4th October）

Firstly, the Federal Reserve’s shift in monetary policy has had a significant impact on the market. On September 18, the Federal Reserve announced a 50-basis-point rate cut and indicated that further cuts of 50 basis points or more could occur within 2024. This move not only signals the end of the U.S.'s tightening policy but also releases global liquidity, creating opportunities for capital inflows into emerging markets. As a key part of the global market, Chinese concept stocks, with their relatively low valuations, have attracted more attention from investors. After nearly four consecutive years of decline, the valuations of Chinese concept stocks have dropped to historical lows. As of September 23, the price-to-earnings (P/E) ratio of Chinese concept stocks stood at just 17.75, significantly lower than the median valuation over the past five years, making them more attractive compared to other asset classes.

Moreover, the Federal Reserve’s rate cuts typically lead to a weaker U.S. dollar. Historical trends show that when the dollar weakens, capital tends to flow back into emerging markets. This suggests that more international capital may be reallocated to high-quality emerging market assets, including Chinese concept stocks, driving their valuations higher.

At the same time, China’s government policies have provided additional internal support for Chinese concept stocks. Recently, the Chinese government announced a policy allowing investors to take out loans using their stock accounts as collateral, injecting a substantial amount of incremental capital into the stock market. This policy enables investors to use the assets in their stock accounts as collateral to obtain loans, allowing them to further leverage their portfolios and increase market liquidity. This has significantly boosted the stock market, particularly for Chinese concept stocks.

Additionally, the Chinese government has injected 500 billion yuan of "targeted liquidity" into the stock market. A portion of these funds has been explicitly directed toward supporting the development of capital markets, helping restore market confidence and vitality. The injection of capital not only increases market liquidity but also stabilizes investor expectations, especially for those long-undervalued Chinese concept stocks. Against this backdrop, the market performance of Chinese stocks has received multiple layers of support, showing strong rebound potential.

With the dual benefits of the Federal Reserve and Chinese government policies, capital is flowing back into Chinese concept stocks. After suffering a decline of up to 70%, the market has already fully priced in factors such as policy, performance, and high valuations. Now, as the Federal Reserve's rate-cutting cycle begins, coupled with the easing of domestic policies in China, market pessimism is gradually being corrected.

Of particular note are certain Chinese concept stock leaders that have bucked the downtrend during the market collapse, such as Trip.com and Legend Biotech, which have demonstrated strong risk resistance. According to Trading Flow’s option data, Trip.com’s option Open Interest surged significantly over the past week. Further analysis by navigating to the Symbol Level Developer interface, where contracts are sorted in descending order by contract Premium and Size, we can see that the majority of these open positions are call options for Trip.com. Delving further deeper into these call options, we can see from the Option Chain Analysis Historical OI Overview section in the following graph, the TCOM $55 Call with expiration date 12/20/2024 had 94.2K and 171.5K completed on Ask side on Sept. 24 and Sept. 27th accordingly. This was a huge bullish sentiment indicating buyers were eager to buy this $55 Call option. Another unusual movement was the TCOM $55 Call with expiration date 01/17/2025 roared from September 26th to September 27th. The contract size of TCOM $65 Call with expiration date 06/20/2025 was outstandingly larger than other call options of which sizes were already large, indicating Trip.com may have further growth in the near future. Trip.com’s robust performance in both domestic and international markets, along with its expansion strategy in the Asia-Pacific region, helped it achieve a countertrend growth of over 28% while most Chinese stocks were in decline.

Overall, the Federal Reserve’s rate cuts will continue to release liquidity, attracting more capital to flow into emerging markets, while China's policy support provides crucial internal momentum for Chinese concept stocks. Going forward, as policies ease and liquidity increases, Chinese concept stocks are likely to experience further valuation recovery. Those leading companies that performed well during the downturn are most likely to become the driving force behind the rebound. Therefore, as market sentiment improves and capital returns, Chinese concept stocks are poised to emerge from their prolonged decline and enter a new upward cycle.

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Disclaimer: This article is for informational purposes only and does not constitute investment advice. Before making any financial investment decisions, please ensure you thoroughly understand all aspects of the information and conduct your own research.

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What is VIX?

The VIX Index is a calculation designed to produce a measure of constant, 30-day expected volatility of the U.S. stock market, derived from real-time, mid-quote prices of S&P 500 Index call and put options. The VIX rises when there is uncertainty or fear in the markets, as investors anticipate higher volatility, and it tends to fall when market conditions are stable or bullish. Therefore, we can see from this 1-month VIX chart, that VIX remains high from September 4th to September 11th 2024.

VIX and U.S. Stock Market

As a volatility index, the VIX is inversely correlated with major stock indices such as the S&P 500 and the Nasdaq Composite Index. This inverse relationship exists because rising volatility often accompanies periods of market decline, as investors become more cautious and uncertain about future market conditions. In contrast, during periods of optimism and market growth, volatility tends to be lower, and the VIX declines. The chart above demonstrates this inverse relationship – when SPY and Nasdaq rise, VIX fall. According to its special feature, it is often considered as a good choice to hedge with U.S. stock market in a compositive portfolio.

Market Sentiment

The correlation between the S&P 500 and the Nasdaq with the VIX provides valuable insights into market sentiment. When both indices are trending upward, the VIX usually declines, signaling confidence among investors. Conversely, when the VIX spikes, it indicates rising fear and uncertainty, often preceding significant drops in the S&P 500 and Nasdaq. Understanding this relationship is crucial for traders and investors who use the VIX as a tool to hedge against market volatility or as an indicator for potential market movements.

According to Trading Flow’s data in Contract Developer Section under Historical Option Trades, we can see on September 6th 2024, VIX had Premium high as $8.75 million, and Average of Implied Volatility was up to 259.66%. This leads to the high percentage of transactions completed on the Bid side of 47.74%, indicating investors were eager to “buy to open” VIX and its rising price and market sentiment was reaching resistance level such that VIX price was high enough. However, looking at SPY that had Net Delta Exposure of -906.08 thousands with a negative market sentiment, the total value of SPY portfolio in the market was positioned to benefit if the underlying asset's (S&P 500) price decreases. There was a clear contrast between VIX high price and SPY negative market sentiment.

Delving deeper into this, let us go to the OI Change Rank under Option Chain Analysis Section in Trading Flow, by selecting the symbol for VIX and ranking the OI DEX that is the OI change by Delta Exposure, the strike price on September 6th 2024 remained high, and there was even on strike price up to $35 with 1,766 volume. Looking at Contract Level Developer by filling in symbol as SPY, expiration date as 2024-09-06, and strike price as 541 for put options, we could see the sharp increase of OI on September 24th. The same day, Nasdaq dropped 2.89%, having a positive correlation with SPY.

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(Source: Unsplash)

The Federal Reserve Announces a Significant 50 Basis Point Rate Cut

Last Wednesday (September 18), the Federal Reserve announced its rate adjustment decision at 2:00 PM Eastern Time.

Shortly after, Chairman Jerome Powell held a press conference at 2:30 PM to explain the reasons behind the rate decision, assess economic conditions, and provide guidance for future policy directions.

This rate cut, the first since the onset of the COVID-19 pandemic, lowers the benchmark rate by 0.5 percentage points in an effort to prevent further slowdown in the labor market.

Federal Reserve Chairman Powell expressed recent concerns about the labor market. Although layoffs have not significantly increased, hiring activities have slowed down considerably. In fact, the last time the monthly hiring rate fell to the current 3.5% (of the total workforce), the unemployment rate exceeded 6%.

As employment and inflation pressures eased, the Federal Open Market Committee (FOMC) decided to lower the key overnight lending rate by 50 basis points, in line with the market's shift towards expecting a larger rate cut.

Apart from the emergency rate cuts during the pandemic, the last time the FOMC made such a large 0.5 percentage point cut was during the global financial crisis of 2008.

This decision lowers the federal funds rate to the 4.75%-5% range.

Additionally, the committee indicated through the "dot plot" that another 50 basis point cut could be expected by the end of the year, aligning with market expectations. Officials also projected a further 1 percentage point rate cut by the end of 2025, and another 0.5 percentage point cut by 2026. Overall, the dot plot suggests that the benchmark rate will drop by approximately 2 percentage points following this rate cut. How did this significant rate cut impact U.S. stocks?

Stock Market Performance After the 50 Basis Point Rate Cut

Following the U.S. rate cut of 50 basis points, global capital markets were shaken, with U.S. institutions engaging in both long and short trades. On Wednesday afternoon, September 18, the Dow Jones dropped 0.25%, the S&P 500 fell 0.29%, and the Nasdaq declined 0.31%. Nvidia decreased by 1.92%, with Apple being the only stock to rise, gaining 1.80%.

However, on Thursday, September 19, U.S. stock futures surged across the board. The Dow Jones rose by 1.27%, the Nasdaq by 2.49%, and the S&P 500 index increased by 1.66%, surpassing 5700 points and setting a new all-time high. According to SPY options data from the Option Chain Explorer in Trading Flow's Option Chain Analysis, the open interest for SPY call options at a strike price of 550 surged on September 18, with positions being set as early as September 6. The open interest for call options with a strike price of 561 continuously increased between September 6 and September 17, reflecting investor expectations of the rate cut.

Chip stocks broadly rose, with ASML up over 5%, TSMC, Arm Holdings up over 4%, Nvidia up over 3%, and Intel up more than 2%.

Bitcoin surged over 6% intraday, breaking through $63,000, with blockchain-related stocks strengthening. MicroStrategy gained over 6%, while Riot Platforms and Coinbase rose more than 5%. Popular Chinese stocks also saw gains, with XPeng up more than 6%, JD.com rising nearly 6%, and Alibaba and Pinduoduo both up nearly 4%.

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To illustrate gamma impact, we'll examine the $542 strike for SPY on August 13, 2024.

At the close of trading on August 13th, we noticed a significant negative gamma bar at the $542 strike in $SPY, which was surprising given the strong rally $SPY experienced throughout the day. There was notable activity at this strike, particularly with Calls. On a day with an upward trend, it was expected that there would be high volume for options expiring that same day (0DTE), given that gamma is a short-term effect and short-dated options typically have the highest gamma values.

For further investigation, we reviewed the options chain for SPY, specifically the 0DTE $542 call contract that expired on August 13th. By selecting Contract Level Explorer within Historical Option Trades that next to Option Chain Analysis, then selecting Size with the proper symbol, expiration date, strike price, and call/put, finally scolling down to the second graph, we accessed the intraday data for this contract.

Immediately, we observed a large spike in ask-side transactions at the $542 strike, with over 25,000 contracts traded around 10:50 AM ET. The average fill price for these contracts was $0.11. The low cost of these contracts, on such a large and liquid instrument as SPY, indicated that they were far out of the money at the time of the transaction. As a result, despite the high volume, the distance from the spot price led to a relatively minor directional gamma impact. To confirm, we clicked on the relevant volume bar.

Upon clicking, we were directed to the OI Rank Change in Option Chain Analysis page, where filters were set to the selected time interval and the selected symbol, and our assumption was validated—the directional gamma impact of the trade was indeed small. To illustrate this, we did some quick calculations.

For simplicity, let's round the trade size to 24,000 contracts. To calculate the total gamma, we multiply the number of contracts (24,000) by 100 (the number of shares each contract represents), and then multiply that by the contract's gamma (0.0589): 24,000 x 100 x 0.0589 = $141,360. This indicates that the impact of this single trade on the entire $SPY options complex was a relatively small $141,360 per 1% move in the underlying asset. Despite the large position size, the gamma impact was minimal.

As the day progressed, the markets rallied strongly. The $SPY price rose from $538.32, closing the regular trading session above $542. Around 1:00 PM ET, we noted a substantial bid-side order for 8,000 SPY $542C contracts.

Let's assume this was the original trader ("Mr. 25K") partially closing their position. Since the spot price was now much closer to the strike price ($541.15), the contract's gamma had increased significantly from 0.0589 to 0.4203—an almost 614% rise. As a result, the 8,000-contract bid-side transaction had a much more pronounced gamma effect.

To quantify this:

8,000 x 100 x -0.420347 = -$336,227.6 per 1% move

(Source: Unsplash)

Earlier, we saw that the 25,000-contract order had a relatively small positive gamma impact, even with a large volume. However, this 8,000-contract bid-side transaction, despite being only 32% of the size of the previous ask-side order, had a much larger negative gamma impact because the spot price was now much closer to the $542 strike. As the day went on, the gamma value for the $542 strike contracts continued to grow, since both Calls and Puts were near the money. This means that as more transactions occurred at the $542 strike, especially those involving the highly profitable $542 Calls, the spot gamma bar for $542 became increasingly negative.

While we won't replicate all the calculations needed to fully account for this effect (as it would require aggregating all $542 strike Call and Put trades across all expirations), this example demonstrates how a small positive gamma impact early in the day can evolve into a large negative gamma impact later on, helping to explain the seemingly counterintuitive "market up, spot gamma negative" bar on the chart.

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Market Summary and Outlook

At the beginning of the August, the U.S. stock market experienced extreme volatility, driven by multiple factors including rumors of Warren Buffett reducing his Apple holdings, changes in Japanese yen carry trades, and mixed economic signals. The week saw wild swings, with major indices like the Nasdaq fluctuating dramatically.

Monday (5th August) saw the Nasdaq drop 6.2% at the open, only to recover some losses by the end of the day. Despite a strong rebound mid-week, investor sentiment remains cautious due to uncertainty surrounding the Fed’s interest rate decisions and upcoming economic data releases.

On Tuesday, after the Bank of Japan hinted at a more supportive approach to monetary policy, the market saw a broad rebound. The Nikkei index, which had hit the lower circuit breaker in the previous trading day, surged and hit the upper circuit breaker. This also led to a strong rally in U.S. stocks, with intraday gains of up to 2.5%. From Trading Flow data, for NDX 240816P176000, most transactions were completed on the ask side, indicating a bearish signal, which Nasdaq rebounded from August 5th’s 17,895.16 to August 6th 18,077.92. However, the option OI increased on Tuesday, indicating the situation might not be as simple. In the last hour of trading, the U.S. stock market experienced a dramatic plunge, dropping 1.5%, catching the bulls off guard.

On Wednesday, the Federal Reserve issued a statement suggesting they were likely to maintain a stricter approach and wouldn't cut interest rates soon. The market rallied again, with the index surging 2% at the open. But just when we thought the market had turned bullish, the index once again experienced a sharp drop after a strong open, this time even more than on Tuesday. By the end of the day, the index closed down 1%, with an intraday drop of 3%. The average volatility of the seven major tech giants exceeded 5%.

On Thursday, unemployment claims data were released, and because the figures were below expectations, the market interpreted this as a sign that the economy had not yet entered a recession. The index saw another violent rebound, closing up 2.87%, with intraday volatility once again reaching 3%. In other words, in the first four trading days of the week, daily volatility exceeded 3%, which led to increased caution across the board on Friday.

On Friday, there wasn’t much happening—it was primarily a day of crushing options implied volatility. The three major indices collectively closed higher, ending the most turbulent week since the beginning of the year. However, looking at the week's overall performance, it can be said that the bulls and bears were temporarily at a stalemate. The Dow Jones fell 0.6% over the week, the S&P 500 dropped 0.04%, and the Nasdaq lost 0.18%. Neither side made significant gains, but options buyers were completely wiped out.

Market Volatility and Strategic Considerations

The market’s current volatility can be attributed to reduced liquidity, with significant sell-offs from major investors like Buffett and declining market liquidity. The VIX index, which measures market volatility, reached levels not seen since the 2020 pandemic peak, indicating heightened uncertainty. While some analysts, like those at Goldman Sachs, believe the market has bottomed out and expect a general uptrend, others, like those at JPMorgan, remain cautious due to potential risks.

(Source: Unsplash)

Trading Strategy

Given the market’s unpredictable nature, a cautious approach is recommended. The potential for further volatility is high, especially with the upcoming data releases. A strategy of buying on dips, particularly in robust companies like META, NVDA, and MSFT, is advised, while being wary of companies facing uncertainties like AAPL, TSLA, and GOOG. The market may see a significant downturn this week, but this could present a buying opportunity, especially towards the end of the week as the outlook stabilizes.

In summary, while the market may not have reached a definitive bottom, it’s approaching a period where strategic buying opportunities could arise, especially if key support levels hold.

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This article will explore the concept of Gamma in options trading, detailing its significance and practical applications within the context of managing options portfolios.

(Source: Unsplash)

Understanding Gamma:

Gamma measures the rate of change of delta (Δ) with respect to changes in the price of the underlying asset. Delta represents the sensitivity of the option's price to changes in the price of the underlying asset, S is the price of the underlying asset, and V is the value of the option.

Gamma is close to 0 implies either the relationship between the price of the option and the price of the underlying asset is linear or the option position has no convexity, i.e., the position holding is far OTM or ITM. Conversely, gamma is highest when option is ATM according to the fastest change of delta at option ATM price, even a small change in underlying price can cause a significant change in delta.

Understanding 0DTE:

Most investors who play around with 0DTE options usually buy OTM or ATM options to bet for the instrinsic value with lower premium. For institutional investors and market makers, understanding 0DTE gamma is crucial for managing risk. They need to adjust their hedging strategies frequently to maintain a delta-neutral position and manage exposure to price changes in the underlying asset.

For example, this is the Intel call option expiring on July 12th 2024. The stock price is 34.6, and the strike price is 35 with 2 more days of expiry. Option price equals intrinsic value plus time value. Since this is an OTM call option, the option price has intrinsic value of 0 left only with time value of 0.38. Suppose Intel stock price rises from 34.6 to 35.6, then this OTM call option becomes ITM, thus the option price becomes 0.92 after calculation. With $1 increase, this 0DTE call option rises 1.5x.

Using the same example by looking at the chart above, we can see this OTM call option on Intel has chance to be ITM, but this high return comes along with high risk. Because 0DTE options have a trading life of only one day, they may lose most of their value within a trading session due to time decay—a concept known as theta. Then there is gamma, which tracks changes in the delta of an option, which makes it highly attuned to the price of the underlying asset. So, in a single trading session, even a minor change in the price of the underlying asset of a 0DTE option can greatly affect the value of the option before it expires.

Understanding Gamma at 0DTE:

Besides moneyness, gamma is also affected by time to expiration. Investors tend to look at 0DTE gamma for several reasons, primarily due to the high sensitivity and potential for significant price movements in the underlying asset as the options approach expiration. As 0DTE approaches, if an option is OTM, it has smaller chance than longer expiration date to be ITM. Thus the delta won’t change that much, leading to a more stable gamma. Same logic applies for ITM options. For ATM options, as expiration nears, gamma increases and the bell-curve-shaped chart of gamma becomes more peaked since it is no surprise that those options which are at the money and with very little time to expiration are the most instable, with highest gamma.

High Sensitivity to Price Movements:

• Increased Gamma: As options near expiration, their gamma increases significantly. This means that the delta of the options changes rapidly with small movements in the underlying asset's price. This heightened sensitivity can lead to substantial gains or losses in a very short period (QuantInfo).

Potential for Significant Profit:

• Leverage: 0DTE options provide traders with the opportunity to use leverage effectively. With high gamma, small movements in the underlying asset can lead to large percentage changes in the option's value, offering the potential for substantial profits from small investments (SteadyOptions).

Market Directional Bets:

• Short-Term Trading: Traders use 0DTE options to make short-term bets on the direction of the underlying asset's price. Given the high gamma, even minor price movements can significantly impact the option's value, making them an attractive tool for day traders and those looking to capitalize on short-term market movements (Morpher).

Risk Management and Hedging:

• Dynamic Hedging: For institutional investors and market makers, understanding 0DTE gamma is crucial for managing risk. They need to adjust their hedging strategies frequently to maintain a delta-neutral position and manage exposure to price changes in the underlying asset (The Trading Analyst).

Market Sentiment Indicators:

• Volatility Indicators: The activity in 0DTE options can also serve as a gauge of market sentiment and expected volatility. High trading volumes and significant gamma exposure in these options can indicate that investors are expecting major price movements or heightened volatility (QuantInfo).

The focus on 0DTE gamma stems from its ability to magnify the effects of price movements in the underlying asset as expiration approaches. This characteristic makes 0DTE options a powerful tool for both speculative trading and risk management, providing opportunities for significant profit while also requiring careful attention to manage the associated risks.

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This article will introduce how traders have profited from Reddit stocks amidst the recent increase in volatility in the U.S. stock market.

（Source: Unsplash）

Last week, driven by the U.S. election and Tesla's earnings report, the volatility in the U.S. stock market increased significantly. Tesla's stock plunged over 12% in a single day after its earnings report, sparking a rise in market panic.

How do traders operate in such a highly volatile market?

TradingFlow team has identified profit opportunities by trading Reddit ($RDDT) stock. On Monday, 22 July, trading signals indicated traders were shorting Reddit. TradingFlow detected unusual activity in Reddit's put options expiring on 9 August with a strike price of $62. Traders bought a large number of these put options when the stock was around $69.75, with an average contract price of $3.37.

From a more precise change in Open Interest (OI), it appears that traders opened over 2,000 new put option positions that day. (Note: The change in OI for a given trading day can only be observed on the following trading day. For example, the OI change for 22 July can be viewed on 23 July.)

Subsequently, Reddit's stock price continued to decline. On Wednesday, 24 July, the intraday low of Reddit's stock approached $62, and the average price of the put options purchased by traders reached $5.58, yielding a profit of over 60% for them.

According to the OI changes, as of 26 July, traders had likely not yet closed their profitable positions and even increased their holdings on 24 July. As of this writing, Reddit's stock price stands at $60.85, hovering around its one-month low, with traders' unrealized gains further expanding.

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This article will review the recent sharp decline in the U.S. stock market, analyze the reasons behind it, and take a look at what the market should focus on moving forward.

NASDAQ Plummets 3%: Tech Giants' Earnings Misses Spark Market Turmoil

According to TradingFlow data, the NASDAQ's net DEX was negative from July 16 to July 23, indicating a bearish signal. The NASDAQ 100 index plummeted 3.6%, wiping out $1 trillion in market value, marking its worst performance since October 2022, driven by disappointing earnings from tech giants TSLA and GOOG. Leading AI sector companies like NVIDIA, Broadcom, and Arm also saw significant declines. The "Big Seven" index of U.S. tech giants fell 5.9%, breaking below the 50-day moving average for the first time since May. Mapsignals Chief Investment Strategist Alec Young noted that investors are realizing the returns on AI investments will take time, which will affect the short-term growth of these giants.

Poor earnings reports from Tesla and Alphabet (Google) have caused investors to question whether the 2024 rally driven by large tech companies and artificial intelligence is sustainable. Tesla's stock dropped 12% due to declining electric vehicle sales. Although Alphabet's earnings had some positive aspects, the market ultimately interpreted them as negative, leading to a sharp drop in its stock price. In the upcoming week, earnings reports from META, MSFT, AMZN, and AAPL will be released, with the market expecting at least two of these companies to miss expectations, potentially exacerbating the decline in U.S. stocks. As the market plummeted, the Chicago Board Options Exchange Volatility Index (VIX), also known as Wall Street's fear gauge, rose to 18.46, its highest level since late April. TradingFlow data indicated that VIX options turnover on Tuesday was nearly double the usual amount.

IBM's second-quarter earnings exceeded expectations, attributing over $2 billion in orders to generative AI, but the market response was muted. As shown in the chart, IBM's net GEX was positive. SK Hynix also reported more than doubling its second-quarter revenue, indicating that the global surge in AI hardware spending may continue. Microsoft introduced gen-AI in Bing search, similar to Google's AI Overviews, while Nvidia designed a new chip specifically for Chinese servers to comply with U.S. regulations.

The market is concerned about the investment prospects of AI technology, fearing that the AI-driven bubble may burst. According to TradingFlow SPY's Gamma Exposure data, the net GEX was negative over the past week, meaning market makers would sell as prices rise and buy as prices fall, increasing market volatility. Although IBM and SK Hynix's earnings showed growth in generative AI and high-bandwidth storage chips, they did not alleviate the market's pessimism towards tech stocks.

Goldman Sachs analysis indicates that the S&P 500 and NASDAQ 100 indices have breached the commodity trading advisor (CTA) sell signal thresholds. If the market continues to decline, trend-following traders might withdraw up to $219 billion from global stock markets, including $67.1 billion from the U.S. market.

The Federal Reserve's interest rate cut expectations also add to market uncertainty. UBS senior U.S. economist Brian Rose stated that the likelihood of a Fed rate cut in September is "close to 100%." However, the market fears that an early rate cut might spark economic recession and earnings decline speculation, leading to a recession trade and further drops in U.S. stocks.

Overall, disappointing earnings from tech giants and concerns over an AI bubble burst have triggered a sharp decline in the NASDAQ. Investors need to monitor the upcoming earnings reports from the four major tech giants and the Fed's rate cut moves to assess the market's future direction.

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（Source: Unsplash）

Exploring the Correlation Between Tech Stocks and Bitcoin

The advent of Bitcoin heralds significant technological innovations and the rise of decentralized blockchain networks. It's intriguing to explore the correlation between the performance of tech stocks and shifts in the Bitcoin market. Often referred to as "digital gold" due to its limited supply and store of value, Bitcoin has experienced notable market movements, especially with the emergence of Grayscale and iShares Bitcoin ETFs. Starting in November 2023, Bitcoin's price surged, reaching a peak of over $73,000 in March 2024.

Invesco QQQ Trust (QQQ):

• Overview: QQQ is an ETF that tracks the Nasdaq-100 Index, encompassing 100 of the largest non-financial companies listed on the Nasdaq Stock Market. This ETF provides exposure to major technology and growth-oriented companies such as Apple, Microsoft, Amazon, and Google.

Direxion Daily Technology Bull 3X Shares (TECL):

• Overview: TECL is a leveraged ETF designed to provide three times the daily performance of the Technology Select Sector Index. It uses financial derivatives to amplify returns, making it suitable for short-term trading rather than long-term investment.

Grayscale Bitcoin Trust (GBTC):

• Overview: GBTC is an investment trust providing exposure to Bitcoin's price movements without requiring direct purchase and storage of the cryptocurrency. It holds Bitcoin, reflecting its value and making it accessible through traditional brokerage accounts.

Market Sentiment and Correlation

Both tech stocks and Bitcoin often respond to overall market sentiment and risk appetite. During periods of high investor confidence, both asset classes tend to perform well as investors seek higher returns from growth-oriented and speculative assets. Conversely, during market downturns or periods of heightened risk aversion, both tech stocks and Bitcoin can experience significant declines as investors move towards safer assets.

Advances in blockchain technology, increased use of digital currencies, and the growth of tech companies contribute to their performance. Macroeconomic factors such as interest rates, inflation, and monetary policy can influence both tech stocks and Bitcoin. For instance, low interest rates and expansive monetary policies can drive investment into high-growth and speculative assets, benefiting both tech stocks and Bitcoin. Conversely, expectations of rising interest rates or tightening monetary policy can negatively impact both asset classes as investors reassess risk and return profiles.

Recent Performance and Trends

From the graph above, it is evident that Bitcoin and GBTC sometimes move in tandem with TECL and QQQ, while at other times, their movements diverge due to various factors discussed. Starting from November 2023, Bitcoin began to rise in September, while QQQ and TECL started their upward trend later. All four assets were in an increasing trend until December 28, 2023, when TECL and QQQ experienced a pullback, leading Bitcoin to a congestion area until February 10, 2024. At this point, Bitcoin’s annual return of 56.95% aligned with TECL’s annual return of 57.92%. Bitcoin began its rapid growth, reaching its historical peak at 73096.85 usdt on March 13th 2024. The 90-day correlation coefficient of the digital currency and the tech-heavy Nasdaq 100 index reached 0.46 in mid May.

From February 10 to July 3, TECL and Bitcoin appeared to have a negative correlation. However, the minor trends within each day and their amplitude were still largely correlated, influenced by market expectations regarding Powell’s speeches, interest rate adjustments, and technological developments.

Recent Market Events

In the past week, from July 3 to July 10, Bitcoin's price dropped to $53,485.93 over two consecutive days, creating market fear and leading the Fear and Greed Index to zero. This was influenced by events such as Mt.Gox’s compensation of 142,000 Bitcoins to past cryptocurrency holders and the German government’s sell-offs. In contrast, TECL showed bearish signs with a net delta exposure of -14.33k from July 1 to July 5, despite a bullish market sentiment indicated by higher call open interest compared to puts.

On July 9, the total open interest of calls was 352,039, and the total open interest of puts was 151,623, suggesting a bullish sentiment for TECL. On the same day, Bitcoin increased from $57,247 to $59,470. While long-term prospects for both Bitcoin and tech stocks remain bullish, particularly with potential decreases in interest rates, short-term breakouts may not be imminent.

Conclusion

Understanding the performance and characteristics of QQQ, TECL, BTC, and GBTC provides a foundation for analyzing their correlation. While each asset has unique drivers, their performance often aligns due to shared market sentiment, innovation trends, liquidity conditions, and macroeconomic influences. Investors can use this correlation to inform their portfolio strategies, balancing risk and return across different asset classes.

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Last week, the US stock market and cryptocurrency market experienced a crazy surge of MEME, reminiscent of the 2021 'retail investors vs. Wall Street' phenomenon.

This new wave of excitement was sparked by the return of the leader from the 2021 frenzy! Roaring Kitty, named Keith Gill, hinted at his comeback on 13th May (last Monday) with a post on his X platform, which had been inactive for three years. GameStop ($GME) saw an intraday surge of over 100%, triggering multiple trading halts. The rally continued into the next trading day (14th May).

GameStop's wild trading activity directly boosted the meme stock sector. AMC Theatres ($AMC) closed up nearly 80% last Monday, with an intraday peak of almost 100%. Last Tuesday, $AMC opened over 100% higher but then declined, closing with a gain of nearly 32%.

Why is Roaring Kitty so influential?

The title "Leader of the Retail Investor Revolution" sounds very intriguing at first. However, an article titled "Who is Roaring Kitty and why is he causing a GameStop stock surge?" gives a more detailed account of Roaring Kitty's journey:

He initially worked at a financial company, but his real rise to fame came through social media.

From 2014 to 2015, he joined Twitter and YouTube, showcasing his trades and market analysis. In 2019, he joined Reddit under the username DFV (DeepFuckingValue). That same year, he started buying $GME stock, believing it was significantly undervalued.

Reportedly, Roaring Kitty initially bought around $53,000 worth of $GME stock at about $5 per share. He then shared his position on Reddit's WallstreetBets (WSB) board, explaining his investment strategy and urging others to join in.

In January 2021, spurred by some positive developments, more and more retail investors started buying $GME, causing the stock to surge by up to 50% in a single day and nearly 700% in one month.

As a result, the short-selling hedge fund Melvin Capital ultimately closed its short positions and admitted defeat.

Options Market Signals Before the Frenzy?

At the end of last month, some $GME stock options showed unusual activity: call options expiring on 17 May with a strike price of $25 saw a large number of ask-side trades on 25 April. On 26 April, even more buy orders flowed in.

More detailed trading data can be seen in the chart below: on 25 April, the open interest for these options increased by 2,374 contracts, with an average price of about $0.10. On 26 April, more buy orders flowed in, and open interest increased by 10,128 contracts. Judging by the average price, the buy orders made on 25 April might have already seen a 100% profit.

Looking at the 'OI DIFF' changes, there was a consistent net inflow of funds before 10 May , with the contracts from the end of April remaining open.

Two weeks later, on 13 May, Roaring Kitty tweeted, and $GME's stock price skyrocketed, sparking the meme frenzy mentioned at the beginning of this article. $GME's price peaked at $64.83. The call options expiring on May 17 with a strike price of $25 saw their average price soar to $24.84, compared to the initial $0.10—an incredible profit!

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The US Q1 earnings season is in full swing, with Tesla ($TSLA) and Meta ($META) experiencing significant volatility following their earnings announcements. Betting on short-term volatility is a common profit-making strategy during earnings season. Additionally, some traders position themselves ahead of time in the direction they foresee, often reaping substantial profits after navigating through the market's fluctuations.

Medical device company Boston Scientific ($BSX) announced its Q1 earnings in the pre-market on Wednesday, beating expectations and propelling its stock price to soar. More than a month prior to $BSX's earnings announcement, traders had already positioned themselves in anticipation.

According to TradingFlow data, on 15th March, shortly after market open, traders began to enter the fray. A large trade of 3.1k contracts, expiring on 17th May with a strike price of $67.5, was executed, with the contracts trading near the midpoint at approximately $2.10, indicating a 'mid' execution.

(Source: TradingFlow.com)

Referring to the open interest (OI) data (see chart below) provides more clues about this trade. On 15th March, the initial OI value was 1072, and the aforementioned trade involved a volume of 3.1k, indicating it was likely a new position being opened. The OI for this call option increased by 3120 on the same day, indicating it was executed at the ask price, classified as a 'mid' execution on the order book.

(Source: TradingFlow.com)

Judging from the change in open interest (OI) for this call option (see chart below), even amid fluctuations, and possibly retracements in contract prices from 15th March until the eve of $BSX's earnings day (23rd April), traders held their positions without liquidating.

(Source: TradingFlow.com)

On 4th April, the contract price surged to a peak of $3.3 (see chart below). On 22nd April, just before $BSX announced its earnings, a large call option with a volume of 5.02k flowed in, while the contract price had fallen from its previous high of $3.3 to around $2.8. As the contract was executed near the midpoint of the bid-ask spread, it was classified as a 'mid' execution. Following the aforementioned logic, it's more likely that the transaction was executed at the ask price. You can explore the data analysis further on TradingFlow.

(Source: TradingFlow.com)

On 24th April, $BSX announced its latest quarterly earnings. Q1 performance exceeded Wall Street expectations, with earnings per share of $0.56, surpassing FactSet's forecast of $0.51. Additionally, $BSX raised its full-year 2024 outlook, adjusting earnings per share from the previous range of $2.23 - $2.27 to $2.29 - $2.34, surpassing the market's general expectation of $2.25.

Following the earnings announcement, $BSX stock price surged, reaching a high of $74.39 during Wednesday's trading session, up nearly 7.6%. By the close, the gains retreated to 5.68%, but the company's stock still hit a historical high.

(Source: Moomoo)

Meanwhile, the call option contracts that the aforementioned trader wagered on reached a peak of $7.10 during intraday trading. Considering only the transaction volume of 3.1k contracts (with a cost of approximately $2.10), compared to the highest contract price, the trader's profit amounted to approximately 238%.

(Source: Moomoo)

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The US stock market has entered the bustling stage of Q1 earnings season. Commencing this week, the market will progressively witness the earnings evaluations of tech behemoths like Microsoft and Meta. With last week's tech stock sell-off, the direction of the earnings season's trend has become more uncertain.

In order to capture market signals in advance, this article will take stock of recent options big players' bets on four star tech stocks including $NVDA, $META, $AMZN, and $MSFT. Bullish options for all four tech giants have attracted substantial capital. What does this signal mean?

· Nvidia $NVDA

By tracking the flow of funds, our TradingFlow team discovered that Nvidia's call options with a strike price of $880 expiring on 21 June, 2024, saw a massive influx of capital, with a trading volume of 37,700 contracts.

From the open interest (OI) perspective, this substantial volume of call options has not yet been closed, indicating traders' confidence in Nvidia's future market trends.

· Meta Platforms $META

The scrutiny facing TikTok in the US is likely to benefit Meta in terms of expanding its business. From the perspective of options big players' fund operations, long-term bullish options have garnered favor. For instance, the open interest (OI) of Meta call options with a strike price of $600, expiring on 19 December, 2025, has consistently remained high:

Considering the flow of funds, some options big players have engaged in forward rolling, shifting their positions from call options expiring on June 18, 2026, with a strike price of $950 to $1030. The trading volume amounted to approximately 95,000 contracts, involving about $200 million. This move, transitioning from out-of-the-money to even further out-of-the-money options, suggests that traders believe the previous leverage was not high enough and have decided to further increase their bets.

· Amazon $AMZN

Goldman Sachs lowered its target price for Pinduoduo ($PDD) due to the potential impact of H.R.7521 bill passed by the U.S. House Committee on Energy and Commerce on its cross-border business in March. Which company stands to benefit? Taking into account the U.S. economy, employment, inflation, and consumption, Amazon may stand to benefit.

Option data indicates that some options big players closed out bullish call options expiring on 15 March, 2024, with a strike price of $145, and rolled over to bullish call options expiring on 21 June, 2024, with a strike price of $160. This involved a trading volume of approximately 155,000 contracts, totaling around $300 million.

· Microsoft $MSFT

As the AI industry continues to thrive, more and more companies are joining the fray. Industry leader Microsoft is gradually becoming more subdued, and its stock performance is relatively average. However, there are still large bullish options positions lurking.

Data shows that some options big players have rolled over from call options expiring on 15 March, 2024, with a strike price of $350 to call options expiring on 17 May, 2024, with a strike price of $380. This involved a trading volume of approximately 50,000 contracts.

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Recently, with the majority of giant tech stocks undergoing a pullback, the overall performance of the US stock market has been lackluster. However, there are still traders seizing intraday opportunities.

In this edition, we will share recent intraday trading activities regarding Apple Inc. ($AAPL), where traders capitalized on the stock's upward trend, reaping substantial profits within the same day.

Options activities first appeared during the midday of 11th April, when a significant influx of buy orders for 3rd May expiring call options with a strike price of $185 flooded in after Apple's stock price confirmed a breakthrough above the $169 resistance level.

This trade involved approximately 1000 contracts, with an average execution price of around $0.63 per contract. As seen in the chart above, following this transaction, there were subsequent buy orders for 300 and 200 contracts. Meanwhile, the price of Apple stock continued to rise.

As shown in the chart below, as of approximately 2:32 p.m. on 11th April, the total number of buy orders reached around 2200 contracts, pushing the cost of this series of buy orders to approximately $0.74. All of these transactions resulted in immediate profits upon purchase. After around 3:20 p.m., there were consecutive transactions executed on the bid side, totaling approximately 1500 contracts of call options being sold, with an average execution price of around $1.30.

Based on the open interest (OI) change data obtained on 12th April for the trading day of 11th April (see the chart below), it can be observed that the OI increased by 1689 contracts. However, with the support of the unusually high volume of ask and bid side transactions mentioned above, the total volume of trades for this option contract on the 11th April exceeded 7000 contracts. This suggests that not all trades on that day were new positions being opened; there was a higher likelihood of intraday trading activity. The transactions executed on the bid side were likely profit-taking exits by traders who had bought the call options two hours earlier.

By comparing the selling price of approximately $1.30 with the buying price of approximately $0.74, the trader achieved an intraday profit rate of over 70%, making it a highly successful intraday momentum trade.

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In this article, let's take a look at recent unusual options activities in chip manufacturer Marvell Technology ($MRVL) to understand how to track options trading opening and closing.

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In recent market conditions, with the reduced likelihood of Fed rate cuts this year and a surge in March non-farm payrolls, volatility has increased in the tech sector. Within the chip sector, the options activity of Marvell Technology ($MRVL) has caught the attention of the Wall Street Quantitative Team.

On 22nd March, there was an unusual trading volume for $MRVL call options with a strike price of $70 and an expiration date of 17th May, exceeding 2500 contracts shortly after the market opened. Throughout the remaining trading hours, there continued to be scattered trades related to this call option.

Could these trades be "opening positions"? Since most of the contract volumes involved in the above trades are smaller than the previous day's open interest (2241), determining whether they are "opening positions" requires more data.

The open interest (oi) data obtained on the next trading day, 25th March, showed that 9577 contracts from 22nd March were carried over to open interest. Considering the order sizes during trading hours on 22nd March, it is highly likely that these trades were all new openings.

From the Avg price column in the chart above, on 22nd March, the average transaction price for the relevant trades was $3.29, and the contract average price dropped on the next trading day. Judging from the open interest (oi) changes, traders did not close their positions but endured the decline and continued to hold the contracts.

On 26th March, $MRVL's stock price rebounded by over 3%, and the aforementioned contract trades began to profit after offsetting the decline. It is also noteworthy that the call options saw an almost doubled increase in oi, indicating that the traders may have added to their positions.

On the TradingFlow platform, we can access the intraday data for 26th March (see the chart below). Half an hour after the market opened that day, a large number of orders flooded in, and the total volume continued to rise throughout the rest of the day. Judging from the addition of 10839 oi data on that day, it can be determined that the related trading orders were also new openings.

On the next trading day (27th March), the average contract price reached $6.01, indicating that traders who continued to hold the contracts likely obtained substantial returns.

On 28th March, the oi decreased by 4026 contracts. At the same time, intraday data showed that 4349 call option contracts were traded with a bearish sentiment, indicating that the traders mentioned earlier may have closed a portion of their positions. As of 5th April, the oi continued to remain at 17000+. It appears that the traders still hold a majority of the contracts, and compared to their initial entry prices, they have likely made substantial profits!

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Disclaimer: This article is for informational purposes only and does not constitute investment advice. Before making any financial investment decisions, please ensure you thoroughly understand all aspects of the information and conduct your own research.

As one of the most cost-effective investment platforms currently on the market, moomoo is definitely a go-for for those who would like to fund their option trading. Moomoo not only provides $0 commission fees and $0 US stock option contract fees. Index options are subject to a $0.5 contract fee per contract. Other fees may apply. Until March 31(th), new users have chance to earn up to 8.1% APY on idle cash and 15 free stocks. By enrolling in the Cash Sweep Program, you can enjoy 5.1% basic APY and an extra 3% APY for 3 months once the Rate Booster coupon is activated. With no additional subscription fees required, moomoo provides free real-time options quotes, no longer delayed by 15 minutes. Click the link below to try moomoo and receive your welcome free stock and cash sweep bonus!

https://j.moomoo.com/00IRhe

Disclaimer: The full article is for information sharing only and does not provide any investment advice. Please be careful with the information provided in the article. The data interpretation in the article may be biased or deficient, so please make your own independent analysis and judgment. If you have any questions about the content of the article, please contact the support team. Options trading is risky and not appropriate for everyone. Read the Options Disclosure Document (j.us.moomoo.com/00xBBz) before trading. Options are complex and you may quickly lose the entire investment. Supporting docs for any claims will be furnished upon request. $0 commission trading is available only to U.S. residents trading in the U.S. markets through Moomoo Financial Inc. Other fees may apply. For more information, visit moomoo.com/us/pricing The Cash Sweep Program is a feature of the brokerage account and should not be viewed as a long-term investment or savings option. The APY might change at any time. Neither Moomoo Financial Inc. nor any of its affiliates are banks. Enrollment in the Cash Sweep Program is required to earn interest on uninvested cash. Promo 8.1% APY (as of 01/11/24): Base Rate is 5.1% APY, plus a 3% temporary boost is available for 3 months on up to $20K in the Program once coupon is activated. Actual APY earned may differ as the base rate may change. The Deposit Welcome Bonus is only available to clients who have never made a deposit. The free stocks received will vary. After receiving the free stocks, you will need to maintain your average assets based on the deposit requirements for 60 days to unlock the stocks. Other terms and conditions apply. Moomoo is a financial information and trading app offered by Moomoo Technologies Inc. Securities are offered through Moomoo Financial Inc., Member FINRA/SIPC. The creator is a paid influencer and is not affiliated with Moomoo Financial Inc. (MFI), Moomoo Technologies Inc. (MTI) or any other affiliate of them. The experiences of the influencer may not be representative of the experiences of other moomoo users. Any comments or opinions provided by the influencer are their own and not necessarily the views of MFI, MTI or moomoo. Moomoo and its affiliates do not endorse any trading strategies that may be discussed or promoted herein and are not responsible for any services provided by the influencer. This advertisement is for informational and educational purposes only and is not investment advice or a recommendation to engage in any investment or financial strategy. Investing involves risk and the potential to lose principal. Investment and financial decisions should always be made based on your specific financial needs, objectives, goals, time horizon and risk tolerance. Any images shown are strictly for illustrative purposes. Past performance does not guarantee future results.

While the options market may seem complex, it is also quite fascinating. Unlike buying stocks and waiting for a rise or fall, options contracts offer multiple directions for trading and can be combined like building blocks.

In this article, we will introduce four trading types for options, and explain the practical application of positions through two recent cases of unusually volatile stocks captured by our Team.

（Source: Midjourney）

The Four Basic types of Options Activity

In the options trading market, the elements of rise, fall, buy, and sell can be combined to create four trading types:

1. Buy a call option: Investors who buy call options have the right to purchase the underlying asset at a pre-agreed price (strike price) on the option's expiration date.

2. Sell a call option: Investors who sell call options are obligated to sell the underlying asset at a pre-agreed price (strike price) on the option's expiration date.

3. Buy a put option: Investors who buy put options have the right to sell the underlying asset at a pre-agreed price (strike price) on the option's expiration date.

4. Sell a put option: Investors who sell put options are obligated to purchase the underlying asset at a pre-agreed price (strike price) on the option's expiration date.

In options trading, to explore more market implications of a transaction, it is often combined with "to open" or "to close" positions. Therefore, the above four trading types can be simplified into two categories:

· Buying Options Contracts

Buy to open

Buy to close

· Selling Options Contracts

Sell to open

Sell to close

"Buy to open" refers to investors purchasing a new position for themselves, where this new position can be either a call or a put. When investors are ready to sell (or close) the position they bought, they will "sell to close".

"Sell to open" refers to investors opening a new short position. To close the "sell to open" position, they would need to "buy to close".

The details of an options trade are crucial and can be challenging to navigate. In previous articles by the TradingFlow Team, there have been signals captured through identifying large opening trades.

Read more: What to Learn from Shorting Tesla Stock Amidst Its Decline?

How to Identify the Type of Options Activity?

The buying and selling of options are determined by whether the option trade occurs at the ask or bid side. If the option trade is initiated by the buyer, they will match the trade with the ask price on the order book. Similarly, sellers will match trades with the bid price on the order book.

However, to determine whether it is an opening or closing position, it is done by comparing the open interest (oi) of the option chain on the following day with the open interest of the current day. If the open interest of the option chain increases, it indicates an opening position; conversely, if it decreases, it indicates a closing position.

To assist traders in more accurately determining the movements of the Smart Money, TradingFlow has launched a new feature. In the "Option Chain Analysis" data panel, it combines Option Flow with open interest boards, adding reference elements for determining option trading operations. The example below shows the data related to Tesla ($TSLA) as of 3rd April:

On 28th March, there was an overwhelming volume of trades executed at the bid side. The updated open interest (oi) data on the following trading day showed a sharp increase. Thus, we can speculate that the trades executed at the bid side were likely "sell to open" positions.

Here are two options trading cases. Let's take a look at how signals of stock market movements are accurately captured!

Case Study 1: Nikola ($NKLA)

· Buy to Close Case

Electric vehicle stock Nikola has seen a continuous uptrend over the past two weeks, with its stock price nearly doubling. As the stock price surged, the options trading volume for $NKLA also increased significantly.

Even before the start of the $NKLA uptrend, there was notable attention on the unusual options trading volume (see the chart below). On 14th March, there was an anomaly in $NKLA Call options with an expiration date of 19th April and a strike price of $1, where the trading volume significantly exceeded the daily average. However, judging from the steep decline in the open interest (OI) value, this is most likely a "buy to close" operation. In other words, an investor likely closed out the previous sell call position before the substantial rise in $NKLA.

Case Study 2: Vistagen Therapeutics $VTGN

· Buy to Open Case

Biotech company Vistagen Therapeutics $VTGN, after experiencing a washout period starting from August 2023 for about three months, began accumulating at the bottom and started to rise after a brief trial. On 28th March, there was an unusual movement in $VTGN's market, with the stock price rising after the opening bell. The increase reached over 20% at one point, before settling down to 15.5% by the close of trading.

Before the rapid rise in $VTGN, there was already a bullish positioning from 15th March to 20th March. Combining this with the changes in open interest (OI) data, we can observe significant unusual buying of Call options on 19th March and 20th March. The transactions categorized as MID on 15th March could also potentially be trades executed at the ASK side.

If you like this article, please subscribe. To use all the tools, start a free trial for 14 days now. Promotion 30% off with promo code: 30PCTOFF ends July 15th, 2024.

In addition, we also offer TradingFlow self-service analysis platform. If you are interested in learning more or trying it out, please apply through this link.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Before making any financial investment decisions, please ensure you thoroughly understand all aspects of the information and conduct your own research.

As one of the most cost-effective investment platforms currently on the market, moomoo is definitely a go-for for those who would like to fund their option trading. Moomoo not only provides $0 commission fees and $0 US stock option contract fees. Index options are subject to a $0.5 contract fee per contract. Other fees may apply. Until March 31(th), new users have chance to earn up to 8.1% APY on idle cash and 15 free stocks. By enrolling in the Cash Sweep Program, you can enjoy 5.1% basic APY and an extra 3% APY for 3 months once the Rate Booster coupon is activated. With no additional subscription fees required, moomoo provides free real-time options quotes, no longer delayed by 15 minutes. Click the link below to try moomoo and receive your welcome free stock and cash sweep bonus!

https://j.moomoo.com/00IRhe

Disclaimer: The full article is for information sharing only and does not provide any investment advice. Please be careful with the information provided in the article. The data interpretation in the article may be biased or deficient, so please make your own independent analysis and judgment. If you have any questions about the content of the article, please contact the support team. Options trading is risky and not appropriate for everyone. Read the Options Disclosure Document (j.us.moomoo.com/00xBBz) before trading. Options are complex and you may quickly lose the entire investment. Supporting docs for any claims will be furnished upon request. $0 commission trading is available only to U.S. residents trading in the U.S. markets through Moomoo Financial Inc. Other fees may apply. For more information, visit moomoo.com/us/pricing The Cash Sweep Program is a feature of the brokerage account and should not be viewed as a long-term investment or savings option. The APY might change at any time. Neither Moomoo Financial Inc. nor any of its affiliates are banks. Enrollment in the Cash Sweep Program is required to earn interest on uninvested cash. Promo 8.1% APY (as of 01/11/24): Base Rate is 5.1% APY, plus a 3% temporary boost is available for 3 months on up to $20K in the Program once coupon is activated. Actual APY earned may differ as the base rate may change. The Deposit Welcome Bonus is only available to clients who have never made a deposit. The free stocks received will vary. After receiving the free stocks, you will need to maintain your average assets based on the deposit requirements for 60 days to unlock the stocks. Other terms and conditions apply. Moomoo is a financial information and trading app offered by Moomoo Technologies Inc. Securities are offered through Moomoo Financial Inc., Member FINRA/SIPC. The creator is a paid influencer and is not affiliated with Moomoo Financial Inc. (MFI), Moomoo Technologies Inc. (MTI) or any other affiliate of them. The experiences of the influencer may not be representative of the experiences of other moomoo users. Any comments or opinions provided by the influencer are their own and not necessarily the views of MFI, MTI or moomoo. Moomoo and its affiliates do not endorse any trading strategies that may be discussed or promoted herein and are not responsible for any services provided by the influencer. This advertisement is for informational and educational purposes only and is not investment advice or a recommendation to engage in any investment or financial strategy. Investing involves risk and the potential to lose principal. Investment and financial decisions should always be made based on your specific financial needs, objectives, goals, time horizon and risk tolerance. Any images shown are strictly for illustrative purposes. Past performance does not guarantee future results.

In this article, we will use examples of Google options trading to see how to profit from directional swings in the market.

Since the emergence of ChatGPT, we've witnessed a surge in stock prices for tech giants like Nvidia, Meta, and others in this AI wave. However, Google, which also established its AI presence early on, has seen lackluster stock performance.

Amidst such price movements, are there still opportunities for profit?

Recently, options traders seized the upward swings in Google's stock price, profiting from bullish option plays.

First, let's take a look at Google's recent stock trends. Looking at Google's daily chart (we'll use Google's Class A shares $GOOGL as our reference), we can see that Google's A shares rebounded after dropping to around $130 earlier this month.

(Source: TradingView)

Last week's upward gap occurred after reports of Apple negotiating with Google for AI features on the iPhone. The news of these discussions boosted market sentiment for Google, causing the stock price to briefly approach previous highs during the trading session

Long Trade on 7th March

On 5th March and 6th March, after Google's stock price hit a new low for the year, there was a continuous inflow of funds for long positions. During trading on March 7th, a large number of bullish options with a strike price of $135 and an expiration date of 17th May were bought:

Looking at the contract open interest (OI) (see chart below), there was a significant increase in positions on March 7th. By the end of the trading day, over 17k contracts turned into open interest. Judging from the OI DIFF indicator, it's likely that traders who opened new positions are holding contracts and potentially profiting significantly after 14th March.

Also on 7th March, there was activity in the options contracts for 19th July with a strike price of $155. The trading volume for contracts with a Bullish sentiment far exceeded the average:

On 7th March, traders transacted at an average price of around $3.28. Subsequently, the contract price peaked on 18th March with an average of approximately $8.98. However, based on the OI data, it appears that traders holding the contracts did not take action and continued to keep their positions open.

Long Trade on 11th March

After 7th March, activity in long positions persisted. On 11th March, there was a frenzy of buying for 12th April call options with a strike price of $143. The unusually high trading volume caught the attention of TradingFlow team:

The trade at 12:32:42 (see above), as seen from the volume exceeding the open interest (OI), is likely a new opening position. The intraday chart (see below) provides a clearer picture, showing significant inflows into call options around 12:16 and 12:32.

Looking at the overall data on 11th March (see chart below), there was a significant increase in open interest (OI) for the 12th April call options with a strike price of $143. Buy orders accounted for 80% of the total. Based on the OI analysis, it's likely that the trader exited some of their positions on 18th March, with an average contract price of $9.09, achieving over 200% return compared to average price on 11th March.

If you like this article, please subscribe. To use all the tools, start a free trial for 14 days now. Promotion 30% off with promo code: 30PCTOFF ends July 15th, 2024.

In addition, we also offer TradingFlow self-service analysis platform. If you are interested in learning more or trying it out, please apply through this link.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Before making any financial investment decisions, please ensure you thoroughly understand all aspects of the information and conduct your own research.

As one of the most cost-effective investment platforms currently on the market, moomoo is definitely a go-for for those who would like to fund their option trading. Moomoo not only provides $0 commission fees and $0 US stock option contract fees. Index options are subject to a $0.5 contract fee per contract. Other fees may apply. Until March 31(th), new users have chance to earn up to 8.1% APY on idle cash and 15 free stocks. By enrolling in the Cash Sweep Program, you can enjoy 5.1% basic APY and an extra 3% APY for 3 months once the Rate Booster coupon is activated. With no additional subscription fees required, moomoo provides free real-time options quotes, no longer delayed by 15 minutes. Click the link below to try moomoo and receive your welcome free stock and cash sweep bonus!

https://j.moomoo.com/00IRhe

Disclaimer: The full article is for information sharing only and does not provide any investment advice. Please be careful with the information provided in the article. The data interpretation in the article may be biased or deficient, so please make your own independent analysis and judgment. If you have any questions about the content of the article, please contact the support team. Options trading is risky and not appropriate for everyone. Read the Options Disclosure Document (j.us.moomoo.com/00xBBz) before trading. Options are complex and you may quickly lose the entire investment. Supporting docs for any claims will be furnished upon request. $0 commission trading is available only to U.S. residents trading in the U.S. markets through Moomoo Financial Inc. Other fees may apply. For more information, visit moomoo.com/us/pricing The Cash Sweep Program is a feature of the brokerage account and should not be viewed as a long-term investment or savings option. The APY might change at any time. Neither Moomoo Financial Inc. nor any of its affiliates are banks. Enrollment in the Cash Sweep Program is required to earn interest on uninvested cash. Promo 8.1% APY (as of 01/11/24): Base Rate is 5.1% APY, plus a 3% temporary boost is available for 3 months on up to $20K in the Program once coupon is activated. Actual APY earned may differ as the base rate may change. The Deposit Welcome Bonus is only available to clients who have never made a deposit. The free stocks received will vary. After receiving the free stocks, you will need to maintain your average assets based on the deposit requirements for 60 days to unlock the stocks. Other terms and conditions apply. Moomoo is a financial information and trading app offered by Moomoo Technologies Inc. Securities are offered through Moomoo Financial Inc., Member FINRA/SIPC. The creator is a paid influencer and is not affiliated with Moomoo Financial Inc. (MFI), Moomoo Technologies Inc. (MTI) or any other affiliate of them. The experiences of the influencer may not be representative of the experiences of other moomoo users. Any comments or opinions provided by the influencer are their own and not necessarily the views of MFI, MTI or moomoo. Moomoo and its affiliates do not endorse any trading strategies that may be discussed or promoted herein and are not responsible for any services provided by the influencer. This advertisement is for informational and educational purposes only and is not investment advice or a recommendation to engage in any investment or financial strategy. Investing involves risk and the potential to lose principal. Investment and financial decisions should always be made based on your specific financial needs, objectives, goals, time horizon and risk tolerance. Any images shown are strictly for illustrative purposes. Past performance does not guarantee future results.

In this edition, we will explore how shorts have been navigating and profiting from the recent downturn in Tesla's stock price through options data.

(Source: Unsplash)

Tesla faced continuous challenges last week, with its stock price dropping below $200 and continuing its downward trend, hitting a low of $173.

As of last Friday's (8th March) closing, Tesla had fallen by a total of 13.47% for the week. Additionally, reports from the media suggest that the power outage issue at Tesla's Berlin factory might persist.

Let's take a look at how bearish traders have been navigating this Tesla pullback and how they've been able to spot trend signals.

The first notable event widely observed by the market occurred on 1st March, shortly after the market opened around 9:42 AM Eastern Time. A significant amount of bearish sentiment (as shown in the chart below) flooded in, with trading volume surging. Nearly 3,000 contracts of call options with a strike price of $215 were sold at around $3.9 per contract:

(Source: TradingFlow)

Furthermore, looking at the full-day volume data on 1st March, by the time of the closing bell, open interest (OI) had significantly increased, with sellers accounting for nearly 74% of the total. This suggests that the large sell-off of calls that day was likely opening positions (considering subsequent movements in Tesla's stock price, this trade probably resulted in substantial profits):

In addition to the unusual activity in the options expiring on 28th March, further digging into the data reveals that since February, there has been significant activity in the put options expiring on 22nd March with strike prices of $165 and $170:

（The Tesla put expiring on 22nd March with a strike price of $165）

From the data in the chart below, we can see that the put expiring on 22nd March with a strike price of $165 had a trading volume of nearly 7,000 contracts on 12th February, with asks accounting for over 78%.

However, after 12th February, Tesla's stock price showed overall upward volatility, with a notable 6% increase in closing price on 15th February. During this period, the contract prices dropped by as much as 80%. Despite the significant decrease in overall trading volume, we can observe a continued rise in Open Interest (OI).

Following 29th February, trading volume surged, OI continued to rise, and sellers dominated the majority of trades. There is a high probability that this was the same trader adding to their position on dips:

As of 6th March, the average price for trading these contracts reached $2.74. Considering the possibility of traders adding to their positions on dips, the profits from this round of trading should be quite substantial.

The put options expiring on 22nd March with a strike price of $170 traded similarly to the details mentioned above (see chart below). Based on the average contract price, the profit potential for this $170 strike put trade may be even higher:

If you like this article, please subscribe. To use all the tools, start a free trial for 14 days now. Promotion 30% off with promo code: 30PCTOFF ends March 15th, 2024.

In addition, we also offer TradingFlow self-service analysis platform. If you are interested in learning more or trying it out, please apply through this link.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Before making any financial investment decisions, please ensure you thoroughly understand all aspects of the information and conduct your own research.

As one of the most cost-effective investment platforms currently on the market, moomoo is definitely a go-for for those who would like to fund their option trading. Moomoo not only provides $0 commission fees and $0 US stock option contract fees. Index options are subject to a $0.5 contract fee per contract. Other fees may apply. Until March 31(th), new users have chance to earn up to 8.1% APY on idle cash and 15 free stocks. By enrolling in the Cash Sweep Program, you can enjoy 5.1% basic APY and an extra 3% APY for 3 months once the Rate Booster coupon is activated. With no additional subscription fees required, moomoo provides free real-time options quotes, no longer delayed by 15 minutes. Click the link below to try moomoo and receive your welcome free stock and cash sweep bonus!

https://j.moomoo.com/00IRhe

Disclaimer: The full article is for information sharing only and does not provide any investment advice. Please be careful with the information provided in the article. The data interpretation in the article may be biased or deficient, so please make your own independent analysis and judgment. If you have any questions about the content of the article, please contact the support team. Options trading is risky and not appropriate for everyone. Read the Options Disclosure Document (j.us.moomoo.com/00xBBz) before trading. Options are complex and you may quickly lose the entire investment. Supporting docs for any claims will be furnished upon request. $0 commission trading is available only to U.S. residents trading in the U.S. markets through Moomoo Financial Inc. Other fees may apply. For more information, visit moomoo.com/us/pricing The Cash Sweep Program is a feature of the brokerage account and should not be viewed as a long-term investment or savings option. The APY might change at any time. Neither Moomoo Financial Inc. nor any of its affiliates are banks. Enrollment in the Cash Sweep Program is required to earn interest on uninvested cash. Promo 8.1% APY (as of 01/11/24): Base Rate is 5.1% APY, plus a 3% temporary boost is available for 3 months on up to $20K in the Program once coupon is activated. Actual APY earned may differ as the base rate may change. The Deposit Welcome Bonus is only available to clients who have never made a deposit. The free stocks received will vary. After receiving the free stocks, you will need to maintain your average assets based on the deposit requirements for 60 days to unlock the stocks. Other terms and conditions apply. Moomoo is a financial information and trading app offered by Moomoo Technologies Inc. Securities are offered through Moomoo Financial Inc., Member FINRA/SIPC. The creator is a paid influencer and is not affiliated with Moomoo Financial Inc. (MFI), Moomoo Technologies Inc. (MTI) or any other affiliate of them. The experiences of the influencer may not be representative of the experiences of other moomoo users. Any comments or opinions provided by the influencer are their own and not necessarily the views of MFI, MTI or moomoo. Moomoo and its affiliates do not endorse any trading strategies that may be discussed or promoted herein and are not responsible for any services provided by the influencer. This advertisement is for informational and educational purposes only and is not investment advice or a recommendation to engage in any investment or financial strategy. Investing involves risk and the potential to lose principal. Investment and financial decisions should always be made based on your specific financial needs, objectives, goals, time horizon and risk tolerance. Any images shown are strictly for illustrative purposes. Past performance does not guarantee future results.