Unusual Options Activity: $1.3 Million on 3 Quick Rebounds

Looking at my Unusual Options Activity scanner, a major focus last week was clearly electric vehicle stocks.

The latest climate and social spending bill that just went into law played a key part. New EV credits on used vehicles, and a spending program for more charging stations, have investors as bullish as ever on this niche market.

There was a ton of bullish action on EV stocks like the newly public Rivian, along with the leading American juggernaut Tesla, and many others.

We even pointed out some highly bullish activity on Tesla a couple weeks back. Those trades clearly doubled or even tripled that trader’s money, in almost no time.

But for our top picks today, we’ll go beyond those momentum plays we saw, and point out a few other unusual trades that caught my attention.

This week our focus is on rebound trades. These three UOA trades are hyper-short-term, with the options dated out less than a month. They’re all betting on quick rebounds on a variety of sectors.

Let’s dive right in…

3 UOA Rebounds to Put on Your Radar

Anaplan (PLAN), a cloud-based planning platform company, saw heavy calls pour in after a sharp drop that hit the stock just days ahead of an earnings announcement.

One trader bought almost 3,000 contracts, worth $700,000, of the December 17, 2021 $62.50 call options for $2.30.

Let’s look at the chart…

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You can see the red bars on the right of the chart show the drop that pulled this trader in. They are clearly buying the dip ahead of earnings — an approach that can lead to some rapid gains, when done right.

This trader only bought out to December 17, about a month away. So either look for a quick bounce, or be ready to preserve capital on a trade like this.

Our next unusual options trade was on a hot commodity during the winter months, natural gas prices. It’s tracked by the United States Natural Gas Fund (UNG).

Over $100,000 went into the December 10, $21 call options for $0.93 per contract. Over 1,250 contracts were purchased at once. Here’s the chart…

(Click here to view larger image.)

What we see on the chart is a broader dip taking place, but it’s coming after a strong move higher. Clearly, this trader is expecting a rebound as we head into the winter months — a seasonally strong time for natural gas.

I like trades like this because they’re simply riding the trend. Natural gas prices have doubled in 2021 and now we have a brief dip playing out.

It was enough to pull this trader in and scoop up $100,000 worth of bullish calls to profit from a quick rebound.

The December 10 expiration leaves them just a few weeks to make a profit on this trade. They were really aggressive with the $21 strike, but looking to play an upswing here looks like the right move.

Our last unusual options trade for this week is on Meta Platforms (FB), formerly known as Facebook.

This trader spent over $500,000 on an even shorter-term move. They grabbed 1,400 contracts of the December 3, $375 calls for $2.65.

But the chart setup is exactly what we were just talking about. A pullback amid a strong uptrend.

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From March to September, the stock soared about 50%. Then we got the dip, but now the stock is rallying again.

This trader is looking to continue riding this momentum to the upside, and they believe it’ll play out over the next two weeks since they purchased the December 3 expiration date.

That’s all for this week’s unusual activity.

Again, a lot of bullish activity in electric vehicle stocks. Then we saw more traders bet on continued rallies for Meta and natural gas prices, and one trader bottom fishing on Anaplan.

With Thanksgiving this Thursday, the stock market will be closed, but the options market is staying active.

I’ll recap some more unusual options activity for you next Monday.

Regards,

Chad Shoop, CMT
Editor, Quick Hit Profits

P.S. As a new week begins, another market Fast Lane opens up…

As we speak, I’m doing my analysis on which area of the market will prove to be the fastest lane… and which stock will be the fastest car.

By the time you read this, my newest Fast Lane alert might already be out.

So if you don’t want to miss out on my top two trades this week, just go here to learn how you can take part.

Chart of the Day:
Do or Die

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Tech stocks, as measured by the Invesco QQQ Trust (QQQ), are at a do-or-die point today.

We’re right up at the top of a very long-term channel. Nearly every time over the past year that we’ve hit this channel, we’ve come back down with some volatility.

It’s certainly possible we break up through this channel, but tech stocks are at fairly overbought levels right now. Plus, fewer and fewer stocks in the tech sector are trading at new highs.

At the same time, Jerome Powell was just confirmed to stay in position as Fed Chair — something the market clearly approves of. And relatively speaking, the overbought levels we’re seeing today aren’t as severe as those in February or August 2020. We can get more overbought.

Like I’ve been preaching all the past week, this is a spot to be cautious. Take some profits on your winners, and maybe even look to cut some losing positions if they’ll suffer more in a bout of volatility.

Regards,

Mike Merson
Managing Editor, True Options Masters