Microsoft (MSFT) had two of the top three Vol/OI (volume-to-open-interest) ratios on Thursday. Options volume was below average yesterday; that shows in the unusual options activity, with Lucid (LCID) the only other stock to have a Vol/OI ratio over 100.
The options flow for Microsoft’s two calls points to a low-risk Bull Call Spread. In this instance, the institution that made this trade bought 14,875 $525 call contracts long for $923 per contract or $13.73 million. It simultaneously sold 14,875 $600 call contracts for $86 in premium per contract, or $1.28 million, and a net debit of $837 per contract, or $12.45 million.
The bull call spread data above is from Friday morning trading. As you can see, the shares are up more than 3% from yesterday’s trade prices. Still, the risk/reward ratio, which was 0.13 to 1 for the two trades, remains reasonable at 0.28 to 1. As I said, it’s a low-risk bet that MSFT stock will move higher over the next 36 days. One day in, it already has.
If you’re looking for a non-tech, low-risk bull call spread from yesterday’s unusual options activity, here are three I’d consider.
Have an excellent weekend.
Robinhood Markets (HOOD)
Robinhood Markets (HOOD) had six unusually active options yesterday. All were calls, and all expire in a week today. While you could combine the $137, $134, and $127 calls with the $123 call, the options flow points to the $128 call. That said, the $123/$127 combination also had a big trade yesterday, so it’s worth considering.
As the data below shows, the $123/$127 combination has a lower net debit of $0.98 versus $1.14 for the $123/$128 combination. However, risking an additional two cents by buying the $123 call and selling the $127 call provides a maximum profit percentage that is 30 percentage points lower than using the $128 call.
The expected move over the next week is 5.58%, while the breakeven is 4.86%, which suggests that despite the low profit probability of 28.1%, there’s a reasonable chance the $123/$128 combination will make money.
The Barchart Technical Opinion for HOOD is a 100% Strong Buy.
Moderna (MRNA)
Moderna (MRNA) had 12 unusually active options yesterday, so I’m not showing them. They were split evenly between calls and puts. I’m interested in the calls. The six had DTEs (days to expiration) ranging from eight to 176 days. I’m interested in the three expiring a week today.
The bull call spread would involve buying the Oct. 2 $195 call and selling either the Oct. 2 $205 call or the Oct. 2 $210 call to reduce the cost of the $195 long call.
The largest trade for a Moderna bull call spread yesterday was 950 contracts at 10:25:54 a.m. ET. About 10 minutes later, there was also a trade for 300 contracts for the same $195/$205 combination.
The net debit and maximum loss for the 900-contract trade was $2.41, while the maximum profit was $7.59, for a risk/reward ratio of $0.32 to 1, and a maximum profit percentage of 314.9%.
To make money on the bull call spread, the share price will have to increase by at least 5.4% in the next week to the $197.41 breakeven [$195 strike price + $2.41 net debit]. The expected move is 7.44%, so it’s more than possible. In fact, as I write this approaching noon, Moderna’s share price is $198.36, above the breakeven for the institution that made yesterday’s bet.
The Barchart Technical Opinion for MRNA is a 100% Strong Buy.
ExxonMobil (XOM)
ExxonMobil (XOM) had five unusually active options yesterday, with four calls and one put. I’m interested in the Oct. 2 $167.50 call and the Oct. 2 $172.50 call.
The options flow from yesterday shows that a multi-leg trade for 304 contracts took place at 10:12:47 a.m. ET. The institution/trader bought $167.50 long calls for $155 per contract and sold $172.50 short calls for a $49 premium, for a net debit of $106.
The maximum loss is also $106, while the maximum profit is $394, for a risk/reward ratio of 0.27 to 1 and a maximum profit percentage of 371.6%. The share price must increase by 4.7% to $168.56 to break even. The expected move is only 2.63%, so it will be tougher to make money on this trade, especially given the share price is down 1.1% midday and 2.5% from yesterday’s bull call spread trade.
Analysts are lukewarm about XOM stock. Of the 26 covering the stock, 11 rate it a Buy (3.81 out of 5), with a target price of $168.24, below the $168.56 breakeven. Of the three, XOM is the least attractive bull call spread of the three.
The Barchart Technical Opinion for XOM is an 80% Strong Buy.
On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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