Are Option Traders Betting On Higher Prices For Trade Desk?

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What Happened: Last Monday, The Trade Desk (NASDAQ: TTD) posted beats on both EPS and revenue. Stock and option traders got long in droves as the stock gained almost 28% on the day and closed the week above the prior all-time highs of $98.29.

The stock hasn’t skipped a beat as it’s up almost 5% today and holding around the $105 strike as of this writing on 9.8 million shares versus the 10-day average of 10.3 million shares.

Prior to this Monday, the stock had about 330,000 calls and 332,000 puts for a total of 662,000 options. However, today alone the option market has traded over 120,000 options with approximately 91,000 calls and 28,000 puts (image below).

total_option_flows_today_ttd.png

Why It Matters: The total amount of options traded today is approximately 18% of the total open interest. Anytime a stock trades over 10% of its open interest in one day, it means options traders are very active on that stock.

Today alone approximately three out of every four options are calls, so options traders are making bullish bets on The Trade Desk. Now prior to this, approximately 29% of the options are rolling off this Friday.

However, of the roughly 120,000 options traded today, about 60,000 are expiring this Friday (Nov. 19). This means over 250,000 options are rolling off this Friday, which may create a headwind going into the expiry.

What’s Next: Looking at the open interest and volume for this Friday’s expiry, the strongest strikes by volume are the $100, $105 and $110 levels. Meanwhile, the largest open interest is at the $100 strike with the $105 and $110 strikes holding about half the open interest by comparison (image below).

front_month_open_interest_and_volume_ttd.png

Looking further ahead, the December monthly expiry (Dec. 17) also has the strongest open interest around the $100 strike, suggesting option traders may view this as strong support going forward with potential scope for a move towards $110.

If however, the stock closes below $100 this week, options traders may lower their forward-looking expectations towards the $95 and $90 strikes.

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