Market Insights

Rigetti Computing just broke out, and options traders adjusted a large bullish position.

This large transaction occurred shortly after Friday’s opening bell:

• 60,000 12-September 16 calls traded for $3.18.
• 60,000 12-September 14 puts changed hands for $0.03.

Volume was below open interest in those contracts. That suggests existing positions were closed shortly before their expiration at the end of the session. Two other blocks crossed at exactly the same second:

• 60,000 September 20 calls were purchased for $0.67.
• 60,000 September 17 puts were sold for $0.35.

Volume was above open interest in these contracts, which expire one week later (on September 19). Given the expirations and open interest, it appears that a “risk reversal” position was closed and rolled forward in time.

Calls and Puts

The risk reversal, similar to a synthetic long, involves selling puts and buying calls. It’s an advanced options strategy with the potential to generate considerable leverage with significant risk.

Puts fix the level where investors can sell a security. They tend to gain value to the downside and lose value when prices rise. Calls fix the level where a stock can be purchased. They can appreciate when shares rally.

Rigetti Computing (RGTI), daily chart, with select indicators.

The risk reversal uses the proceeds from selling puts to buy calls. If prices gain, the trader benefits from the puts sold short losing value, while the calls may gain.

That’s apparently what happened in the case of Friday’s trade. The investor would have collected $3.15 by closing the old position and spent $0.32 opening the new position. Making the adjustment also prevented the investor getting assigned shares.

Quantum Breakout

RGTI surged 15 percent to a nine-month high of $19.15 in afternoon trading. While no single headline seemed to explain the move, the stock has benefited from optimism about countries investing in quantum computing. RGTI, for example, announced on September 2 it would help India develop systems for academic and government research. CEO Subodh Kulkarni added that the deal could help the company design and deliver products for the giant Asian country.

Quantum computing has moved from the theoretical fringes toward the mainstream in the last year. Originally intended for national-security purposes like advanced cryptography, the technology is now being explored for potential uses in commercial fields like drug development, logistics and finance.

Friday’s large trade pushed total options volume in RGTI to about 3 times the daily average in the last month, according to TradeStation data. Other quantum-computing stocks like IonQ (IONQ) and Quantum Computing (QUBT) also climbed.

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