Unusual Options Activity in Alcoa Corporation (AA)

Today, December 17, 2021, among the underlying components of the NYSE, we saw unusual or noteworthy options trading volume and activity in  Alcoa Corporation, which opened at $52.26.

• There were 1,000 contracts traded on the $48 strike put option contract, dated for February 18th, 2022, sold to open at the bid.
• The volume of this order was higher than the open interest already on the chain from this morning’s open, addressed in a section below.

These orders come after our report last month, as well as additional reports from the Trefis Team reporting that Alcoa Corporation:

“jumped 7.5% in just the last one week and is above $50, completely outperforming the S&P 500 which dropped 1% during the last one week.  If you look at the change in stock over the last ten days, AA stock has increased 8.4%, again outperforming the market.”

On the 14th, there were 327 contracts in circulation and as of today’s open, there were 328.  The volume seen today at 1,001 is novel volume, and therefore these orders can be considered to have been bought or sold to open, as there were not enough contracts already in circulation to have closed.

To view more information about AA's daily flow breakdown, click here to visit unusualwhales.com.

Unusual Options Activity in Alibaba Group Holding Limited (BABA)

Again upon the NYSE, we saw significant and “beluga sized” options activity in Alibaba Group Holding Limited (BABA), which opened today at $119.49.

• There were 18,440 contracts traded on the $10 strike put option, dated for January 21st, 2022, bought to open above the ask.
• Be mindful, this chain’s bid-ask spread was $0.00 to $0.04 at the time these positions were opened, so it is difficult to ascertain the premise behind these positions being taken.

These orders come after Reuters’ reports:  “China's Alibaba pledges carbon neutrality by 2030.”

53.1% of the premium traded at these premium levels are in bullish bets, with 47.4% as ask-side orders, and 23.6% are in call premiums.

To view more information about BABA's flow breakdown, click here to visit unusualwhales.com.

Unusual Options Activity in Cerner Corporation (CERN)

Finally, and again in the NasdaqGS, we saw unusual or noteworthy options trading volume and activity today in Cerner Corporation (CERN), which opened at $22.39.

• There were two trades sized at 4,000 contracts conducted on the $70 and $85 strike put option, dated for January 21st, 2021, sold to open at the bid and bought to open at the ask, respectively.
• Additionally, there were two other trades sized at 3,500 contracts each traded upon the $100 strike call option, sold to open at the bid, and the $80 strike put option, bought to open at the ask, also for January 21st, 2021.
• Be mindful!  Cerner Corporation’s ex-dividend date is December 23rd, 2021.
• Therefore, there may be a significant increase in call volume coming ahead of the ex-dividend date due to the fact that investors are looking to capture as much of the dividend as possible and are looking to exercise deep in the money call options.

Of note, one of the trades listed above was cancelled, and therefore struck through in the options flow.

Trades that are struck through have been cancelled for one reason or another.  Trades can be modified or nullified for a variety of reasons, and per the SEC:  

“for the maintenance of a fair and orderly market.”  

Exchanges can erroneously send more trades than were actually placed, especially during times of high volume.

This is a normal occurrence.

To view more information about CERN's flow breakdown, click here to visit unusualwhales.com.

Witching Days

Questions regarding “witching days” have been popping up here and there, so we’d like to take the time to address what witching days are and how they might impact your trading today.

Witching days occur once a quarter, (typically) on the third Friday of March, June, September, and December.

Quadruple Witching

On quadruple witchings, all of the following expire simultaneously:

• stock options
• stock index options
• single stock futures
• and stock index futures

Triple witchings occur when three of the above expire simultaneously.

Double witchings are when two of the above expire simultaneously.

Witching Hour

Prior to the close on a witching day, there is an increase in volume in trading as traders are rolling their contracts to further out dates, closing positions outright, and opening new positions altogether.

Be mindful! There is a considerable increase in volatility up into witching days. To some, there are "arbitrage opportunities" by trading this volatility.

Risk of Exercise & Assignment

Prior to witchings, market makers and brokers alike will require shares to cover their positions and their clients' positions; therefore, brokers have the right (and responsibility) to exercise existing contracts to obtain those shares in order to keep the markets operational.

Please be careful holding contracts through witching days unless you are taking advantage of those "arbitrage" opportunities yourself!