Found in the Flow - Options Strategies & Unusual Options Activity in Affirm Holdings, Inc. (AFRM)

Found in the Flow - Options Strategies & Unusual Options Activity in Affirm Holdings, Inc. (AFRM)
Affirm Holdings, Inc. (AFRM)'s price since August 30th, 2021 per TradingView: https://www.tradingview.com/chart/LTsHBiUa/

A Review of Unusual Options Activity & Whales’ Strategies

On August 30th, 2021, in the market capitalization-weighted index NASDAQ Global Select Market Composite (NasdaqGS), we reported on unusual options activity in Affirm Holdings, Inc (AFRM)., which opened then at $96.24.

These orders had all came after news of Affirm Holdings statement that it has partnered with Amazon.com, Inc. (AMZN) for a “buy now, pay later” service.

Per the chart above, representing Affirm Holdings, Inc.’s daily price, in blue, there was a high today of 15,978 call volume on August 25th, in green. Open interest, in yellow, had risen to 138,414 as of Friday, the 27th, from 124,855 on the 24th.

One Retailer’s Strategy to Take Advantage of the Flow

On August 31st, 2021, one Twitter user posted a variety of potential trade ideas.

Seen above are the Twitter trader’s ideas, described as follows:

One such idea was to purchase the $100 strike call option dated for September 17th, 2021 and to sell the $110 strike call option for the same date against it, creating a call debit spread.  The total entry cost would have been a debit, approximately $220 at the time, with a maximum profit of $780, or a 354% return on investment.

Another was to sell the $85 strike put option, also dated for September 17th, 2021, and buy an $80 strike put option against it, for the same date, to result in a put credit spread.  This strategy would have collected a credit for entry of approximately $185, which would also be its maximum profit, and its maximum risk would have been $315 if the short side put had ended in the money at the date of expiration.

The above orders would have all reached maximum profitability, as on September 17th, 2021, Affirm Holdings, Inc, closed at $116.28, meaning the call debit spread would have reached its cap of profit, and the put credit spreads would have expired in favor of the seller, against the buyer, as they would have been out of the money.

Additional Unusual Options Activity That Followed

On September 13th, 2021, we reported again on further unusual options activity in Affirm Holdings, Inc (AFRM)., which opened then at $110.21.

In our report, we calculated that the premium collected from selling these call option contracts represented approximately $1,055,000, a third of the approximate $3,000,000 paid for the $110 strike call options.  

Furthermore, these orders had came after reports that Affirm has now risen to become the most valuable player in the entire BNPL industry..

Seen above are the orders from the Unusual Whales Flow, described as follows:

There were a total of 1,850 contracts traded on the $110 strike call option at the ask, dated for November 11th, 2021, representing approximately 185,000 shares.

Additionally, there were another 1,000 contracts traded on the $160 strike call option at the bid, dated for January 21st, 2021, representing another 100,000 shares.

Finally, there were another 1,000 contracts traded again on the $160 strike call option at the bid, for the same date, representing another 100,000 shares.  If all of these orders were traded as a part of a strategy, they would represent a kind of diagonal, or a call credit spread across separate dates, as a calendar spread is, but with different strikes.  

These types of spreads, while rarely used, are useful for expecting longer-term volatility, albeit with relatively stable price action in the short term.  Given this, it would be presumed these orders were not a part of a strategy in spite of their similar sizing.

Recent Unusual Options Activity

As of Wednesday, September 22nd, 2021, Affirm Holdings, Inc (AFRM) opened at $108.5 and closed at $114.07.  There was additional unusual options activity detected, however this time the sizing of the positions taken and the volumes were reduced.

Seen above are the top six orders of premiums greater than $10,000 on the Unusual Whales options order flow for September 22nd, 2021.
Seen above, the majority of betting of minimum premiums of $30,000 or more of the topmost 250 positions were on the January 21st, 2022 expiration, with $309,980,487 bearish premium traded. The most active strikes were at the $70 strike price, amounting to $223,459,353 bearish premium.


However, seen above, for betting of premiums of $1,000 or more of the topmost 250 positions, there is a different sentiment, wherein the most active strike was $115 with bullish premium leading, and the most active expiration, aside from this week’s expiration, is October 15th, 2021.
The above chart shows Affirm Holdings, Inc.’s price, in blue, since around August 2nd, 2021; call volume is represented in green, put volume in red, and open interest in yellow.

As seen, call and put volume have begun to trend downward since the highs around our first report while Affirm Holdings, Inc.’s price has continued to trend up; however, open interest has not significantly changed since September 17th, which reveals there is still as much betting or contracts being traded, as it has decreased from 391,672 to 307,865, which is still above its mean at or around 124,928 open interest.

On September 23rd, 2021, Affirm Holdings, Inc. closed at $126.89.

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