Options shift

Before Microsoft (MSFT) and Meta (META) appeared to ease concerns about an AI-spending slowdown with their robust earnings rallies last Thursday, another stock with an AI theme made a much bigger move.

Oddity Tech (ODD), a consumer tech company focusing on using AI to develop, personalize, and market health and beauty products, rallied 30% to $61.44 last Wednesday after topping earnings estimates. The move catapulted shares above their former record close of $55.40 from August 2023, when the company had been trading publicly for less than three weeks:

As of Monday, the stock had tacked on an additional 6.9%, topping $65. While call volume outpaced put volume when the stock surged last Wednesday, traders following the stock may have noticed that put activity has had the edge since—including yesterday, when it was a little more than 22 times average:

Most of the activity has occurred in out-of-the-money strikes prices (that is, below the current stock price). For example, last Thursday, when put volume was around 44 times average, the big trade was a 1,000-contract position in the July $50 puts. Similarly, Monday’s biggest trades were in the May and June $60 puts.

Some observers may view the shift from calls to puts in recent days as an indication that traders and investors were either (in the long term) hedging long ODD stock positions or (in the short term) expecting the stock to retrace, at least temporarily, some of its earnings rally. That’s entirely possible, but since there’s a seller on the opposite side of every put purchase, it’s also plausible to assume at least some bullish traders may have been selling puts to collect premium.

Analyzing the open interest (OI) totals for the next few expirations also highlights a shift toward puts. In the May options (expiring May 16), there were 1.5 open call contracts for every put contract. That ratio shrank to 1.2 for the June expiration, and fell further to 0.9 for the July options, where puts outnumbered calls by more than 100 contracts.

Market Mover Update: June WTI crude oil futures (CLM5) started the week with another sharp sell-off, falling more than 5% intraday on Monday (hitting $55.30) before recovering more than half of its slide (see “Slippery oil picture”). The Trade Desk (TTD) rallied more than 4% intraday on Monday, with earnings scheduled for Thursday (see “Targeted options play”).

Today’s numbers include (all times ET): trade deficit (8:30 a.m.), FOMC meeting begins.

Today’s earnings include: Archer Daniels Midland (ADM), Datadog (DDOG), Global Payments (GPN), WK Kellogg (KLG), Lemonade (LMND), Arista Networks (ANET), Cirrus Logic (CRUS), Super Micro Computer (SMCI), Teradata (TDC), Tempus AI (TEM), Upstart (UPST).

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