Options Alert: Big Call Roll in Alphabet

Yesterday saw unusual option action in Alphabet, which has been staggering for months.

This unusual activity appeared around the middle of Wednesday's session in large, simultaneous blocks:

• Some 45,730 September 410 calls were sold for an average premium of $0.94 against open interest of 59,372 contracts.
• Some 45,730 October 375 calls were purchased for an average premium of $7.33 against open interest of 975 contracts.

The trades occurred in large, simultaneous blocks of matching size. That, combined with the open interests, suggests an investor exited an existing position in the September contracts and rolled down to a lower strike in October. Making the adjustment reduces the risk of increased time decay as the shorter-dated contracts near expiration. 

Calls fix the level where a security can be sold. They can gain value when shares rally but can expire worthless without a price increase.

GOOGL rose 0.9 percent to $336.71 yesterday, but has been trending lower since mid-May. It dropped more than 7 percent on July 23 after increased AI spending pushed free cash flow into negative territory. 

Given the stock's falling trend, Wednesday's call roll could have been the work of a trader with a short position who was using the calls as a hedge. Such a strategy would let them benefit from prices falling while protecting against unexpected rallies. Making the adjustment could have cost about $6.39 per share. It also increased their delta from 3 to 24, meaning their contracts could gain more from the stock rising.

Overall option volume in GOOGL was slightly above average in the session, with calls accounting for 74 percent of the total.

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