QQQ Options Volume Skyrockets for Second Day

QQQ options volume is set to peak again, as tech stocks retreat

Jun 12, 2017 at 2:54 PM
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Just last month, tech stocks were flashing signals not seen since the dot-com era. However, the tech sector has been drilled in the past two trading days, sending the PowerShares QQQ Trust (QQQ) -- a tech-focused exchange-traded fund (ETF) based on the Nasdaq-100 Index (NDX) -- below the key $142 level. At last check, QQQ shares are down 0.9% at $138.71, and options traders are paying big bucks to bet on the tech ETF's next move.

Per Schaeffer's Senior V.P. of Research Todd Salamone, the breach of $142 is important because it was the site of the last significant QQQ call open interest in the June expiration series. "Moreover," he writes, "$142.26 is 50% above last year's closing low and 20% above the 2016 close -- round-number returns that may create hesitation among would-be buyers, and/or spark selling among those seeking to lock in some profits."

So far today, roughly 1.26 million PowerShares QQQ Trust puts have changed hands -- four times the average intraday pace. For comparison, fewer than 525,000 QQQ calls have traded thus far, though that's still three times the norm. Total options volume is on pace to hit an annual high for a second straight session, after peaking at nearly 1.9 million contracts on Friday, June 9. Further, QQQ options open interest is already at an annual high, with about 4 million puts and just over 2 million calls outstanding. 

powershares qqq etf options volume
Chart courtesy of Trade-Alert

Several large blocks have traded on QQQ options today, many of which appear to be spreads. Per Trade-Alert, one trader likely sold to open 10,000 QQQ weekly 6/30 131-strike puts to help fund 10,000 bull call spreads at the weekly 6/30 141- and 144-strike calls. The spread was established for a net debit of 11 cents, or $110,000 (premium paid * number of spreads * 100 shares per contract), and will profit if QQQ ends atop $141.11 (bought strike plus net debit). The trader's maximum risk is limited to the initial premium paid, as long as QQQ stays atop the sold 131 strike within the options' lifetime. The sold 144-strike calls limit the trader's maximum reward to $2.89 per spread ([difference between call strikes] - net debit), or $2.89 total, no matter how far the ETF should rebound atop $144.

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