Pete Najarian Sees Unusual Options Activity in These Tech Stocks

Call buyers came out to play in a big way during today’s tech dip. Market Rebellion Co-Founder Pete Najarian was on CNBC’s Halftime Report to break down all the unusual options activity for us, and to tell us which dips he’s buying today. 

Today was a tech day. We saw some rising rate fears begin to come in as the markets adjust to Biden’s renomination of Fed Chairman Jerome Powell. With a rise in the 10-year treasury yield, the market may be telling us that they believe a rate hike is coming sooner than forecasted. A rate hike could be a bane for growth stocks that have built easy-money into their long term forecast. 

But not everyone is so sure. 

A little red is not scaring away these bargain shoppers

At least, not the buyers of calls in NIO ($NIO), Starbucks ($SBUX), Micron ($MU) and Apple ($AAPL).

Pete’s going to talk about each one below, but first let’s take a closer look at this purchase in NIO to answer the question, “Why is this option activity so unusual?” 

NIO is no stranger to unusually high call volumes, but this was on another level. Pete highlighted the purchase of 47,700 contracts which were bought in only three trades. That’s the equivalent of 4,770,000 shares for a company with a market cap at the lower range of the spectrum. Not only that, all 47,700 contracts, (which cost this buyer over 3.2 million dollars) were calls expiring this Friday. 

So why is it unusual? Is it the $3 million dollar price tag? Not necessarily. We’re looking for three very important, specific things.

Volume, Velocity, and Volatility.

This NIO UOA ticks all of those boxes: 

       ○ Volume. Not only did this trade cost a lot more than the average NIO option purchase, but all three were bought far above the existing open interest. This is a big, bold move. 

       ○ Velocity. In this trade, they’re going out of the money and picking the shortest possible time frame. 

       ○ Volatility, which had been descending on this sleeping giant before spiking hard in this name on Monday. Despite the increased volatility, NIO’s 30-Day IV Rank is still sitting at just 65%, which indicates that there’s still a lot of room for volatility to move to the upside in the event that NIO’s share price makes an outsized move again.

Only when a trade ticks all three boxes do we consider it truly unusual.

Listen to what Pete had to say about the unusual options activity he saw today in this name and others below.

Learn how you can use the power of unusual options activity to conquer any market. Click here to download our Insider’s Guide to Trading UOA.