Market Insights

Super Micro Computer has been sliding for almost a year, and one options trader seems to be following the trend.

Four large blocks changed hands in the maker of AI servers at the same time on Tuesday morning:

• 21,500 31-January 41 calls were sold for $0.02 and an equal number of 36.50 calls were purchased for $0.08. Volume was below open interest in both, which suggests an existing position was closed.
• 21,500 31-January 31 calls were sold for $0.45 and an equal number of 31-January 34.50 calls were bought for $0.13. Volume exceeded open interest in both, which suggests a new position was implemented.

Given their matching sizes and timing, the trader likely entered the session with a profitable credit spread in the 41s and 36.50s. He or she apparently closed the position and rolled it lower, looking for SMCI to remain under pressure.

In this case, they initially positioned for prices to stay under $36.50 and held the 41 calls to hedge against a rally. The second position looked for SMCI to stay under $31, with protection at $34.50.

Super Micro Computer (SMCI), daily chart, with 50-day moving average.

Calls fix the price where a security can be purchased. Traders can also sell them to generate income. See this article for more on combining short and long calls into credit spreads.

Adjusting the spread generated a credit of $0.26, which will be their profit if the stock remains under $31 thorough the end of this week. They face potential losses above that level.

SMCI ended the session down 3.1 percent at $28.18 . The stock was an early mover in the AI boom, peaking around $120 in March 2024. It began a downtrend last July and has mostly followed its 50-day moving average lower since. (See the chart above.)

Options trading is not suitable for all investors. Your TradeStation Securities’ account application to trade options will be considered and approved or disapproved based on all relevant factors, including your trading experience. See www.TradeStation.com/DisclosureOptions. Visit www.TradeStation.com/Pricing for full details on the costs and fees associated with options.

Margin trading involves risks, and it is important that you fully understand those risks before trading on margin. The Margin Disclosure Statement outlines many of those risks, including that you can lose more funds than you deposit in your margin account; your brokerage firm can force the sale of securities in your account; your brokerage firm can sell your securities without contacting you; and you are not entitled to an extension of time on a margin call. Review the Margin Disclosure Statement at www.TradeStation.com/DisclosureMargin.