Deal chemistry

The chemicals business may seem about as far as you could get from the market’s tech/semiconductor nexus, but Solstice Advanced Materials (SOLS) suggests the path to the AI story is often shorter than we think.

The specialty chemicals maker, which began trading last October after being spun off from Honeywell (HON), has had an eventful week. Some traders may have noticed the stock on multiple LiveAction scans for unusual options activity on Tuesday, when its put volume was more than 67 times average.

The most noticeable trade was 10,000-plus contracts in the August $65 puts—almost precisely the same total that traded four days earlier, on June 30:

While the contract started off the day out of the money (its contract was below the stock price), it soon transitioned to in the money as shares fell more than 11% intraday to a low of $60.34. That followed a 15.1% drop on Monday, which unfolded as SOLS announced it was acquiring fellow chemicals producer Element Solutions (ESI)—a reported $14.5 billion deal that would effectively make SOLS twice as large overnight (the deal is expected to formally close in early 2027).

The AI angle is that SOLS’ product line includes products used to power and cool AI computers, while ESI specializes in chemicals used in the production of semiconductors—the precise reason, company management claimed, the deal made long-term sense.¹

The stocks of companies that acquire others often take a hit when the deal is announced. Only time will tell if how this one turns out for the companies and its investors. What is interesting in the near term is that SOLS’ decline the past two days is part of a larger, four-day pullback since June 30—the day it closed at a record high, and the same day that more than 10,000 August $65 puts originally appeared on the tape:

Yesterday, open interest (OI) in the contract was 11,000. If today (Wednesday) that total has dropped significantly, it would suggest a large trader who bought the puts on June 30 executed a very well-timed trade, since the contract closed at $0.60 on June 30 and traded as high as $7.25 on July 7.

But if OI is higher today than it was on Tuesday, it could mean traders who bought the puts last week decided to add to their positions, or new traders entered the market.

Market Mover Update: Chip weakness continued to be the story of early July. The PHLX Semiconductor Index (SOX) fell 4.7%, although it closed well above its intraday low.

August crude oil future (CLQ6) rallied nearly 5% on Tuesday—the market’s biggest daily gain in more than a month—in the wake of a reported Iranian attack on a tanker in the Strait of Hormuz. The contract climbed above $72 intraday, and surged above $75 overnight as the US launched retaliatory strikes. 

After attempting to establish a new record close on Tuesday, Apple (AAPL) ended the day lower—but still 13% higher than it was on June 25 (see “Two sides to the memory coin”).

Today’s numbers include (all times ET): mortgage applications (7 a.m.), EIA Petroleum Status Report  (10:30 a.m.), FOMC minutes (2 p.m.).

Today’s earnings include: AZZ (AZZ), Helen of Troy (HELE), Levi Strauss (LEVI), PriceSmart (PSMT).

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¹ Barron’s. Blockbuster AI Deal Shows Why Honeywell Had to Break Up. 7/6/26.