Unusual options activity (someone knows something)

[zxcv64 771]

There's no better strategy than having some insider knowledge. Yesterday there was a very large number of long puts bought in WMT - all done in the last half an hour of market close :

 

I receive a market summary report from another service, and I just read this in their blurb :

 

And the pre-open WMT price has fallen by about 10% to 119. The long puts were bought at around the 0.75 price mark, and they'll now be worth around 11, which is about 15 times their original purchase price. That's a paper profit of over $10million overnight.  Not a bad nights work.

 

 

Edited July 26, 2022 by zxcv64

[Kim 7,943]

Thanks for sharing @zxcv64

it happens all the time, and SEC does nothing about it. It's pretty obvious that this is illegal, and pretty easy to find out who did those transactions.

[zxcv64 771]

Agreed Kim. In theory, this should be the easiest case to solve as there is literally written record of who/which institution places these trades and all the information is there.

Ah well. In the UK be call this sort of thing "The old school tie network" - whereby a select group of senior people look after each other.

 

 

 

 

 

[boneill 35]

This is the screenshot of the largest option trades on Walmart yesterday. Source: Fidelity Investments

[Ringandpinion 1,657]

1 minute ago, zxcv64 said:

"The old school tie network"

LoL, in Texas it is called the "Good old boy network".  And it is pretty impossible to catch it out because everyone has skeletons and everyone else know where they are buried.

[Climbingcat 1]

Same here in Germany "one crow doesn't pick at another's crow's eye"...Skeletons allover the place

[hmunk 3]

Do you the SEC might investigate this one?

[Ringandpinion 1,657]

3 minutes ago, hmunk said:

Do you the SEC might investigate this one?

Who's to say there is not a "Good old boy" quid pro quo going with the SEC.  If recent events have taught me anything, it is that the US government and all the alphabet soup agencies (FBI, CIA, DEA, VA, etc. etc.) are more corrupt than I had imagined.

[Yowster 9,174]

Maybe it was Pelosi's husband again 🙂 

[Ringandpinion 1,657]

I wish I knew something.  Clearly I know less than I thought, this has been a rough trading year, after commissions I'm up maybe 4%, barely beating THE DREADED INFLATION, but at least the press has multiple crises to jabber about.  It is difficult to not raise the bar when you do something really well, last year was a killer trading year for me and even though I try to slap the little devil on my shoulder into silence, he is still there whispering in my ear that I too am mortal.

[zxcv64 771]

1 hour ago, hmunk said:

Do you the SEC might investigate this one?

I don't know enough about the SEC to guess if they will do anything, but someone somewhere who sold these puts has lost a ton of money.

 

And in the US, where it's not uncommon to sue someone for so much as sneezing at the wrong time, the loser(s) in this transaction have a right to make a fuss. Whether they think they can win, is another matter, or if it's worth their legal costs etc etc.

 

It's a pretty clear cut case : insider (or their accomplice) buys tons of long puts 30 mins before close; after market close, WMT announces that their results will be poor; stock falls sharply, and insider makes lots of money.

 

 

[Noah Katz 90]

Wouldn't MM's who sold the puts make a stink about this?

[Kim 7,943]

MMs always hedge, so if they sell the puts they would probably buy the shares to hedge.

[greenspan76 332]

Ya'll are certainly welcome to believe conspiracy theories, but when a company with a market cap of $362BB has somewhere around $1MM in option volume on ATM puts going into earnings when their last earnings led to a 20% drop in stock price, that doesn't seem particularly odd to me. Now I haven't looked back at prior cycles, but in the largest trades you can see a 3k+ contract sweep on the ask, which could easily be a $39MM position hedging risk for 0.5% cost. I think this is a nothingburger.

 

[Ringandpinion 1,657]

4 minutes ago, greenspan76 said:

Ya'll are certainly welcome to believe conspiracy theories, but when a company with a market cap of $362BB has somewhere around $1MM in option volume on ATM puts going into earnings when their last earnings led to a 20% drop in stock price, that doesn't seem particularly odd to me. Now I haven't looked back at prior cycles, but in the largest trades you can see a 3k+ contract sweep on the ask, which could easily be a $39MM position hedging risk for 0.5% cost. I think this is a nothingburger.

 

You are certainly right, but it is much more fun to grumble about the unfairness of someone else making all that money that we should have made, regardless of their reason or skill for doing so.  And especially in this day and age when trust of our institutions, be it government, corporate or social, are at an all time low, and justifiably so.  And for the record, I don't really believe in conspiracies that involve more than one person because I've never seen anything that made me believe people could keep their mouth shut unless a gun was pointed at their head.

[Kim 7,943]

17 minutes ago, greenspan76 said:

Ya'll are certainly welcome to believe conspiracy theories, but when a company with a market cap of $362BB has somewhere around $1MM in option volume on ATM puts going into earnings when their last earnings led to a 20% drop in stock price, that doesn't seem particularly odd to me. Now I haven't looked back at prior cycles, but in the largest trades you can see a 3k+ contract sweep on the ask, which could easily be a $39MM position hedging risk for 0.5% cost. I think this is a nothingburger.

 

Everything is possible, but it's hard to believe that someone would spend over a million dollar for a OTM puts. And the volume was 10 times higher than other strikes.

[zxcv64 771]

31 minutes ago, greenspan76 said:

has somewhere around $1MM in option volume on ATM puts going into earnings when their last earnings led to a 20% drop in stock price, that doesn't seem particularly odd to me.

Fair points, however :

 

Earnings are not until 16-Aug, so if this was an earnings related trade the volume of the options expiring on 19-Aug would have increased.

 

Curious where you are seeing 1million in options volume? Even today, with increased activity, there are only around 10K puts on the 120 strike.

 

[greenspan76 332]

11 minutes ago, zxcv64 said:

Fair points, however :

 

Earnings are not until 16-Aug, so if this was an earnings related trade the volume of the options expiring on 19-Aug would have increased.

 

Curious where you are seeing 1million in options volume? Even today, with increased activity, there are only around 10K puts on the 120 strike.

 

What the? I thought earnings were last night. That is a bit odd. I don't really care enough about the issue to research it, but it looked to me like there were 13k+ $130 puts traded. If you assume they all traded at $0.71 (which is what the one sweep of 3k+ contracts was at), thats about $1MM. I just generally think that all the claims of some sort of insider trading are bs and for some reason felt the need to respond. I'll climb back in my hole now

 

Edited July 26, 2022 by greenspan76

[boneill 35]

This is what moved WMT:

"Walmart (WMT) dropped 7.5% after the retailer late Monday lowered its Q2 and FY23 profit forecasts, with adjusted net income for the quarter now seen falling 8% to 9% from year-ago levels compared with its prior outlook expecting Q2 earnings to be flat to slightly higher. Q2 sales likely will face a $1 billion currency impact, the company said, adding it expects $1.8 billion of currency headwinds during the second half of the year."

 

Someone knew that news was coming and acted on it more than likely.

Edited July 26, 2022 by boneill
adding

[Kim 7,943]

They pre announced earnings, this is the whole point.. if someone traded those options just before earnings, this somehow would make sense. But a million dollar trade 3 weeks before earnings and just before the pre announcement? Too big of coincidence..