2020 Hindsight Brings Out The Foresight To Hedge Into 2021

  • 20,655 4 JAN 21 $370 puts BOT in one print @ $1.24 against open interest of 11,289
  • 20,655 4 JAN 21 $360 puts sold in one print @ $0.25 against open interest of 66,544
  • 28,242 8 JAN 21 $366 puts mostly BOT @ $2.08 to $2.15 against open interest of 2,885

The options traded for the January 4 expiration occurred at the same time and in one print. The trade was either a long put vertical or a long put roll-up. Either way, it is a bearish indication as the traders of these options are looking to hedge or play a down move into the first week of 2021. The 8 JAN 21 trade is a long put trade looking for a potential move below $366 by January 8.

QQQ Option Activity

The option activity on QQQ was about 35% higher than average with most of the activity occurring on the puts. The put-to-call ratio was a lofty 3.34 for today as put option volume was about 55% higher than average. Over 50% of put activity traded between the market. The rest of the volume split evenly between the bid and ask. Here are two large trades that stood out.

  • 20,000 8 Jan 21 $306 puts mostly BOT in one print @ $2.15 against open interest of 5,609
  • 110,000 16 APR 21 $283 puts BOT in one print @ $8.51 against open interest of 50,649
  • 110,000 16 APR 21 $265 puts sold in one print @ $5.45 against open interest of 120,862

The 8 Jan 21 expiration are long puts that were mostly bought in one print of 15,000 contracts. This is indicating a potential downside below $306. The 16 APR 21 expiration saw both contracts traded at the same time in one print. Based on the data, this is a long put vertical or a put roll-up to a higher strike. The higher open interest on the $265 strike suggests that the strike is being raised to $283, which will provide more hedging power.

Conclusion

The size and the coincidence of this activity is interesting as we are about to cross into a new year. This type of activity along with other indicators can help provide a signal to hedge along with the big money in the market. Considering the expiration selection, it’s clear that there is some concern about what will happen once we pass over the turn to 2021.

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