Large trader fingerprints

Some trades are simply difficult to ignore.

Such was the case with Avantor (AVTR) on Monday, when the health care company was at or near the top of nearly every LiveAction scan associated with put options. That will happen when your average daily put volume is around 100 contracts and more than 500 times that number trade shortly after the opening bell.

Monday’s activity was only part of the story, though. Traders who clicked through to AVTR’s options chain to see volume of 53,000 contracts in the December $9 puts also likely noticed an even larger position (55,500) already existed in the $10 puts:

In total, the positions represented roughly 10,850,000 shares of AVTR stock. The position in the $10 puts is also relatively new, taking place on October 29 when shares tumbled 23% after the company released earnings.

That sell-off dropped AVTR to the level of its August low (the stock’s lowest price since March 2020), after which shares spent the next three-plus weeks consolidating. In constrast, Monday’s big trade occurred on a much calmer day for the stock, which traded modestly lower after a 4.8% bounce last Friday:

While trades like the ones that occurred on Monday and October 29 are difficult to ignore, they’re also difficult to decipher. A typical immediate interpretation might be that one or more large traders bought the puts to capitalize on further downside in a falling stock. That’s certainly possible, but it’s no more provable than a hypothesis that the positions are 1) a short-term hedge for a long stock position, or 2) a bullish position established by large traders who sold the puts because they expect the stock to rebound off its recent lows.

Many traders and investors like to ponder what the “smart money” is doing in a given market, but in reality, it’s extremely difficult to determine who the smart money is, let alone decode their trade intentions. In this case, though, it’s fair to say that although AVTR hasn’t done much recently, some traders have a lot riding on how it performs over the next month or so.

Click here to see Morgan Stanley & Co.’s research on AVTR, including analysis of its latest earnings.

Market Mover Update: As noted here yesterday, Thanksgiving week has established a track record for  net bullishness over the years. In addition to that general pattern, certain days around the holiday have tended to be a little more or less bullish than average. For example, while the S&P 500 (SPX) has closed higher on roughly 53% of all days since 1960, its performance just before and after the holiday has been far from typical:

1. The SPX closed up the day before Thanksgiving in 49 of 65 years (75% of the time).
2. The SPX closed up the day after Thanksgiving (Black Friday) in 45 years (69% of the time).
3. The SPX closed down the Monday after Thanksgiving in 41 years (63% of the time).

However, last year the SPX was only one for three on these patterns, closing lower the day before the holiday, higher the day after it, and higher the following Monday.

Today’s numbers include (all times ET): Producer Price Index (8:30 a.m.), retail sales (8:30 a.m.), S&P Case-Shiller Home Price Index (9 a.m.), FHFA House Price Index (9 a.m.), consumer confidence (10 a.m.), business inventories (10 a.m.), Pending Home Sales Index (10 a.m.).

Today’s earnings include: Analog Devices (ADI), Ambarella (AMBA), Abercrombie & Fitch (ANF), Alibaba (BABA), Best Buy (BBY), Burlington Stores (BURL), Dell (DELL), Dick's Sporting Goods (DKS), HP (HPQ), Kohl’s (KSS), J.M. Smucker (SJM), Zscaler (ZS).

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