Stock quiet, options make noise

  • SRPT appeared on multiple volatility scans on Thursday
  • Stock drifted to lowest close since April 30
  • Large OTM trade highlighted heavy put volume

Most people pay attention to a stock when it’s doing something—making a big move or experiencing heavy volume. But there’s something to be said for keeping an eye on a stock sitting on the sidelines. Sometimes, under-the-radar activity may signal the market thinks it may be getting ready to get back in the game.

On Thursday morning Sarepta Therapeutics (SRPT) was drifting lower on light volume—part of a larger downside drift since shares spiked to a nearly one-year high on May 7, a few days after earnings:

Chart 1: Sarepta Therapeutics (SRPT) 12/29/23–5/23/24. Drifting after earnings volatility.

Source: Power E*TRADE (For illustration purposes. Not a recommendation.)

Despite yesterday morning’s nothing-much-to-see-here stock activity, SRPT appeared on several LiveAction scans, including biggest implied volatility (IV) gain from the open, highest 60-day IV and highest 30-day IV:

Chart 2: LiveAction scan: Highest 30-day IV. Stock quiet, IV high.

Source: Power E*TRADE (For illustration purposes. Not a recommendation.)

In other words, the stock may not have been moving much, but the options market was anticipating it could move more in the relatively near future—even though it had recently jumped around a great deal after releasing earnings.

Also, SRPT landed on Thursday’s scans for unusual put volume and high put-call ratios. With average daily put volume of 385 contracts, nearly 6,500 had traded by midday, 5,000 of which were the June $55 puts.

Using the most recent trade price (0.5, or $50 per contract), that could mean, depending on your perspective:

1. an SRPT bull shorted those options because, with the stock trading around $127, they felt confident the stock would not fall below the $55 strike price by expiration, in which case the options would be worthless and they’d be able to keep the $250,000 in premium they’d collected. (They also may have determined that high IV had inflated the value of these options.)
2. an SRPT bear bought them expecting the stock to decline.
3. an SRPT investor expecting volatility bought them as a hedge.

These aren’t the only possibilities, of course—tomorrow’s trade activity could shake up this picture. But traders have to make do with the information available to them in a given moment. And large options trades and elevated volatility can make even a “quiet” stock worthy of tracking.

Market Mover Update: Bumble (BMBL) was responsible for one of the more notable option prints on Thursday. After the stock opened at $12 and fell more than 2% intraday in early trading, 42,300 of the $10.50 puts expiring on June 28 changed hands. BMBL also has open interest of 57,800 in the June monthly $9 puts. The stock hit an all-time intraday low of $9.83 on May 8, just prior to jumping 11.5% after its latest earnings release.

Today’s numbers include (all times ET): Durable Goods Orders (8:30 a.m.), Consumer Sentiment (10 a.m.).

Today’s earnings include: Booz Allen Hamilton (BAH).

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