Options Volumes Hit Record, Concentrated In Just Five Stocks

Last August, in the middle of the low-volume summer doldrums, tech names exploded higher for several weeks in a move which stumped traders only for it to be reveled (on this website first) that the action was due to an attempt by SoftBank’s brand new public equity trading desk to ramp gamma higher in tech names.

The start of July witnessed an almost identical move, as FAAMG names soared higher driven by a surge in call buying. And, while we doubt SoftBank is behind the latest move the sharp increase in options trading activity to start July – July 2nd recorded the highest day of single stock options trading in history – has driven month-to-date average daily notional traded to all-time-highs.

According to Goldman’s Vishal Vivek, strong options trading activity in single stocks, dominated by volumes in AMZN, TSLA, AAPL, NVDA and GOOGL, have driven average daily value traded to an all time high: $534 BN of options have traded on the average day in July (including $348bn in call options), well above the prior year average of $367bn.

As shown below, otions trading has been concentrated in a handful of stocks, with 64% of all trading this month in just 5 names (AMZN, TSLA, AAPL,NVDA, GOOGL), while 87% in the top 50 underliers.

And as has been the case for much of the past year, investors have increasingly focused on trading ultra short-dated options; options with less than 2 weeks to expiry comprise 75% of all trades.

What is notable is that whereas recent bursts of option activity which culminated in the first quarter of 2021 targeted meme stocks, this time the call buyers are going for the FAAMGs themselves. It remains unclear if buyers of call are institutions or retail buyers – it is reasonable that if a big names was behind the ramp it would have leaked by now – it is certainly the case that absent continued option inflows, the push higher in the gigatech “generals” – which have almost single-handedly managed to push stocks to all time highs even as market breadth has collapsed

… will halt and reverse, something we are already seeing in Amazon and Microsoft. Should this reversal accelerate, and if the market’s leadership fails to sustain the recent push higher, then all bets are off.

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