Longer-term options play?

LiveAction scans for unusual options activity routinely include some of the stocks that are making the biggest moves on any given day, and during earnings season those moves are often driven by the companies’ quarterly results.

That’s what made Xylem’s (XYL) appearance on the scan for unusual call options volume on Monday somewhat…unusual:

Not only did the industrial water technology company release its numbers two weeks ago (on July 28), its stock didn’t really distinguish itself on Monday. Yes, it was trading solidly higher (up more than 1%) on a soft day for the broad market, but that was hardly making a move that would draw attention. Shares were trading a little more than 2% below where they closed on earnings day, but were also up more than 14% since the end of May, when they posted their lowest monthly close since late 2023.

Nonetheless, call volume was nearly 42 times average, with almost all of that activity represented by 6,200 contracts in the January $140 calls—a strike price roughly $18 (14.8%) above where the stock was trading around midday. Most of the volume consisted of a single, 5,515-contract trade that occurred in the first five minutes of trading. (The total volume in the January $140 calls was more than two times the largest open interest total in any of XYL’s options contracts.)

A longer-term chart may help put this activity in better perspective. Since 2020, XYL’s shares established a series of relatively wide intermediate-term waves, mostly setting a series of higher highs and lower lows. The stock hit a record high as recently as October 2025, but also fell roughly 30% from that high to its May close:

The establishment of such a sizeable call position nearly two weeks after earnings naturally leads to inquiry about what a large trader could be seeking to accomplish (always a difficult question to answer). Maybe the trader thought the stock was in the process of mounting another rally to new highs, in which case the calls could increase in value. Or, perhaps the opposite—someone thought the stock would remain below the strike price until the January options expiration, in which case a trader who shorted the options could keep (at expiration) all of the roughly $1.93 million of collected premium.

Another possibility is that the trader bought the stock (or already owned it), saw $140 as an attractive target price, and shorted the calls as a de facto exit strategy. Although the trader would miss out on any profits above $140 if the stock kept rallying and the shares were “called away” by the option holders, the collected premium would provide a cushion. And if the stock rallied but remained below $140 until expiration, the trader could also potentially realize gains on the stock as well as the options.

Market Mover Update: After falling nearly 3%, the PHLX Semiconductor Index (SOX) was still roughly 15% above its July 29 close of 10,447.49 it hit on July 29—which is, so far, the low of the bear market that began on July 17. If July 29 does, in fact, turn out to be the low of this correction, it would be the SOX’s third-quickest trip to a bear-market low (after initially falling into one) since 1995. It would also mark the sixth-smallest additional decline (-10.5%) from the start of a bear market (see “Market absorbs latest punches”).

No deal on the Strait of Hormuz as of Monday left September WTI crude oil futures (CLU6) up more than 5% at a six-day closing high above $82.

DaVita (DVA) started the week by continuing to consolidate a little below its August 5 sell-off low (see “In-and-out options”).

Today’s numbers include: NFIB Small Business Optimism Index (6 a.m.), Existing Home Sales (10 a.m.).

Today’s earnings include: Cisco (CSCO), On Holding (ONON), Super Micro Computer (SMCI), USA Rare Earth (USAR).

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