Unusual Options Activity: Bullish on Tesla… and Bitcoin?

A natural constant in unusual options activity are investors that don’t get scared by big moves.

Last week, for example, Tesla shot up more than 10% in a single day on news that Hertz was buying up 100,000 Tesla vehicles for its fleet.

Some traders would think they missed the big upside move, assume there’s no way the stock goes even higher, and grab put options.

But the unusual options activity showed heavy bets rolled into the call side, where traders were expecting more gains over the next couple of weeks.

I talked about this in my latest Quick Takes, how even though Tesla ran higher, and there’s potential for a pullback, you want to stay bullish on the stock.

And that turned out to be correct.

Over the next three days, the stock rose another 5%.

So those calls investors poured into, even on the day of the big 10% jump, paid off big time.

It can be tempting to try to profit on “mean reversion” when stocks like TSLA make huge moves. But you have to pay attention to what the big money is doing.

So in today’s unusual options activity, I spotted a few other big moves investors are chasing higher, and also our first-ever crypto-related activity.

Let’s dive in…

Marqeta, Inc. (MQ), a cloud-based software company, is in a similar situation as Tesla was last week.

Shares recently jumped 50% in two weeks. But, as you can see on the chart below, it was a clear breakout for the volatile stock, and now shares have pulled back a bit.

(Click here to view larger image.)

This is known as a BRB setup. An initial breakout, a retest of the trendline, and then a bounce.

So this trader bought the November 19, 2021 $40 calls for $3.10, roughly $250,000 on this bet.

The crazy thing is, they’re banking on another 40%+ move in the next few weeks. This trader really believes there’s more room to run, and by the amount they put down on the option, they have a high level of confidence.

This next one is an earnings play, coming up this Friday, November 5.

A trader bought $221,000 worth of the PetMed Express, Inc. (PETS) November 19, 2021 $30 calls. They paid $0.80 per contract.

That means they want to see the stock pop to at least $30.80 to hit breakeven. Shares are trading around $28 today, which would indicate an expected rally of at least 10%.

Again, this just gets them to breakeven. So it seems they expect an even bigger move, and that likely makes this an earnings play.

They only have till November 19 before the option expires. With earnings this Friday, they are looking for a big move in a short time period.

And at the moment, the stock is stuck in a falling wedge pattern.

(Click here to view larger image.)

A 10% move would trigger a breakout from here, but it will all depend on how the market reacts to earnings. This trader is willing to bet big bucks for some good news this week.

Fastly, Inc. (FSLY), another cloud platform company, is also breaking out.
One trader put down $167,000 on the stock to jump another 15% before Friday — buying the November 5, 2021 $55 calls for $1.49.

Here’s the chart…

(Click here to view larger image.)

The red resistance line on the chart was a clear selling point for months now. But that was broken a couple weeks ago, and this trader believes it’s off to the races from here.

Now, they’re banking on Fastly’s earnings report on Wednesday to help lift the stock that much in a short time period. But the hefty wager shows us they believe the earnings report will take it there.

Our First-Ever Crypto UOA

Our last unusual options activity for the day is a first for us.

This is on the brand-new bitcoin ETF, the ProShares Bitcoin Strategy ETF (NYSE: BITO).

It took no time for traders to be all over this ETF. And I’m willing to bet we’ll see a lot more activity around this ETF, due to its unique link to futures contracts on bitcoin.

And, for now at least, it’s bullish activity.

One trader grabbed the November 26 $50 call options for $1.25. They bet more than $250k for the ETF to surge 30% in a month.

This would depend on bitcoin rallying as well. The crypto rallied before the launch of the ETF, but has dipped since then. This trader’s banking on bitcoin to rally over the next few weeks.

That’s all for our UOA this week.

Regards,

Chad Shoop, CMT
Editor, Quick Hit Profits

Chart of the Day:
Bitcoin Volatility Bottoming Out

(Click here to view larger image.)

Bitcoin volatility — as judged by an old favorite, the Bollinger band width — is at its lowest point of the year.

And based on what we’ve seen so far this year, that means we’re about to make a huge move… up or down.

You can see in the chart above that for all of 2021, bitcoin’s Bollinger band width has rarely touched the 0.12 level we see today. Whenever it does, volatility tends to pick up shortly afterward. And for most of 2021, those signals have resulted in volatility to the upside.

You know what I mean: Those eye-popping hourly candles where the bitcoin prices move a thousand bucks, or even more.

Thing is, that volatility can manifest just as easily to the downside. That’s what May showed us.

So which way will the volatility swing this time? My money’s quite literally on the upside (I own bitcoin and other cryptos.)

Bitcoin is comfortably holding the 20-day EMA as of this writing, a good picture of short-term health. It recently made a new all-time high and its chart is the perfect picture of an uptrend — higher highs and higher lows.

I still believe we’ll see bitcoin $100k this cycle. If not this year, then early next. In my view, the next surge in volatility likely takes it past its recent all-time high and into $70k territory.

Regards,

Mike Merson
Managing Editor, True Options Masters