Good Tech, Bad Tech: Options Activity Recap


Call volume spiked noticeably in two different technology stocks yesterday, with two very different meanings.

Just look at Broadcom (AVGO). The chip maker went from a darling to a pariah two months ago by purchasing software maker CA (CA). Investors, confused by the logic of the deal, hit the sell button at the time and continued dumping shares through the middle of last month.

Then AVGO stabilized and started to claw its way back up. But yesterday traders sold a whopping 18,000 September 225 calls, most of which crossed the tape for about $13.

As most readers of Market Insights know, owning calls fix the price where a security can be purchased. Writing them is just the opposite, obligating the investor to deliver shares at a certain value in the future. In return, he or she pockets cash up front.

This kind of call selling is a common form of profit-taking, in this case on about 1.8 million shares. (See our Knowledge Center.) AVGO ended the session down 0.64 percent at $234.83.

Want to learn more about options? Sign up for our Options Stars 2018 symposium in Chicago next month.

Just the opposite kind of transaction occurred in action-camera maker GoPro (GPRO): Approximately 13,000 28-September 6.50 calls were purchased for $0.12 to $0.18.

These calls expire next Friday, which suggests the investor expects a move in the short term. That’s interesting because GPRO has chopped in a tight range since the start of the summer. Is a breakout coming?

GPRO rose 2.74 percent to $6.38 on Monday.

Disclosure: Trading options may not be suitable for all investors. This post is intended for educational purposes only and shouldn’t be considered a trade recommendation.

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David Russell is Global Head of Market Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.