If the market’s daily chop this week, and in weeks past, has you feeling whipsawed, you’re not alone – the options market is just as conflicted. Over the past several sessions, big-money traders have been firing off enormous bullish AND bearish bets, often in the same sectors, and sometimes on the same day. This kind of mixed messaging is exactly what you’d expect in a choppy tape where the market can’t decide from one day to the next whether AI and Semiconductor stocks are the place to be, or the place to flee.
Let’s walk through the notable trades from this week, day by day, and you’ll see just how split the “smart money” has been.
Wednesday, July 8 – Bullish
Buyer of 2,000 Dell (DELL) March 500 Calls for $100 – Stock at 440
Buyer of 8,000 Advanced Micro Devices (AMD) August 500 Calls for $61 – Stock at 505
The DELL trade is a big one – 2,000 contracts at $100 puts $20,000,000 at risk, looking for DELL to push above 500 by March expiration. Given the premium paid, the breakeven is all the way up at 600, roughly 36% above where the stock is trading. Notably, DELL has held up much better than its AI peers over the last month and is trading within striking distance of its all-time highs.
The AMD call buy is even larger in dollar terms – 8,000 contracts at $61 puts $48,800,000 at risk. With the stock at 505, these calls are essentially at-the-money, and the trader needs AMD above 561 by August expiration to profit at expiration.
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Tuesday, July 7 – Bullish
Buyer of 5,000 Marvell (MRVL) August 260 Calls for $21.75 – Stock at 233
Buyer of 3,000 Marvell (MRVL) August 175 Calls for $60.20 – Stock at 226
The August 260 call buy puts $10,875,000 at risk, looking for MRVL to push above 260 by August expiration – roughly a 13% move from current levels.
The August 175 call buy is a different style of trade entirely. With the stock at 226, these calls are deep in-the-money, and this trader is putting $18,060,000 at risk. Two trades, two very different structures, but both pointing in the same bullish direction – and this call buying came as MRVL pulled back hard along with its semiconductor peers, on one of the first real dips we’ve seen in the stock in months.
Monday, July 6 – Both Sides of the Boat
Here’s where the mixed messages really show up. On the bullish side:
Buyer of 20,000 Advanced Micro Devices (AMD) October 450 Calls for $160.50 – Stock at 566
This is a MONSTER position – 20,000 contracts at $160.50 puts $321,000,000 at risk. With the stock at 566, these calls are deep in-the-money.
And yet, on the very same day, traders were aggressively buying downside protection (or making outright bearish bets) across the semiconductor space:
Buyer of 8,000 Semiconductor ETF (SMH) July 597.5 Puts (exp. 7/10) for $10.60 – Stock at 612
Buyer of 5,000 Semiconductor ETF (SMH) July 540 Puts for $5.10 – Stock at 612
Buyer of 30,000 Micron (MU) July 730 Puts for $7.15 – Stock at 1,015
Buyer of 2,000 Sandisk (SNDK) July 1,750 Puts for $128.50 – Stock at 1,800
The first SMH put buy is a short-fuse trade – 8,000 contracts at $10.60 puts $8,480,000 at risk on puts expiring 7/10, just days away. That’s a bet on immediate downside in the semiconductor group. The second SMH trade is targeting a much deeper decline, looking for the ETF to fall roughly 12% by July expiration.
The MU put buy is the eye-opener of the group – 30,000 contracts at $7.15 puts $21,450,000 at risk on puts struck nearly 28% below where the stock is trading. That’s either a very cheap disaster hedge on a stock that has had an incredible run, or someone looking for a serious unwind in the memory trade.
And the SNDK put buy rounds out the bearish flow – 2,000 contracts at $128.50 puts $25,700,000 at risk, just below the money with the stock at 1,800.
Interestingly the very next day after these puts were purchased, the semiconductor sector got hit hard.
My Takeaway
Add it all up and you have hundreds of millions of dollars in premium flowing into bullish bets on DELL, AMD, and MRVL, and at the same time, tens of millions are flowing into downside plays on SMH, MU, and SNDK. Essentially, the options market is telling us exactly what the daily price action has been telling us: There is real disagreement among big traders about where the AI and Semiconductor groups go from here.
To see how I’m playing it now, consider a subscription to Cabot Options Trader Essentials.
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