The day Google crashed 12%, somebody sold about $7 million worth of its puts.
If you follow options “flow” on social media, you know how that gets posted. Big money sold puts, so big money is bullish. Buy the dip.
Except that same trade can also be a bet that Google keeps falling.
I spent years as a market maker on the floor of the CBOE, and the first thing the floor teaches you is that an option trade means nothing on its own.
You have to know what’s attached to it.
Give me two minutes, and I’ll show you the simple math every market maker uses to see what a trade actually is.
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Every Stock Position Is Secretly A Call And A Put
A call is a bet that a stock goes up, and a put is a bet that it goes down. Put them together the right way, and you can build any stock position out of options. Market makers call it a synthetic.
Buy a call and sell a put at the same strike and expiration, and your position moves almost exactly like 100 shares of stock. That’s a synthetic long. Sell the call and buy the put, and you’ve built a synthetic short.
Think about it the other way around. If you own 100 shares, you’re effectively long a call and short a put.
One $7 Million Google Trade, Three Completely Different Bets
On Wednesday, the biggest new trade I saw in Google was a trader selling December 280 puts and collecting about $7 million in premium. It was tied to stock, meaning the trader bought or sold Google shares in the same transaction.
Now run it through the math:
- If they bought the shares, long stock plus a short put works out to a long call plus two short puts. That’s a big bullish bet with double the pain if Google keeps sliding.
- Shorting 100 shares against every put gives you a synthetic short call, which is a bet Google doesn’t rally.
- And if they shorted only enough stock to offset the puts, direction cancels out. That trader is betting the panic in Google’s options is overpriced and the stock calms down.
Why 5,000 Amazon Puts Bothered Me Before Earnings
Ahead of Amazon’s earnings on Thursday, traders bought more than 5,000 at-the-money November puts, paying up to $12.60 apiece.
At-the-money means the strike sits right at the stock price, so those puts start paying the moment Amazon slips. Typically, when you see at-the-money put buying right into earnings, that’s not a great sign.
How I Get From 64 Million Trades Down To One
On a normal day, tens of millions of option contracts trade, and most of them are noise: hedges, rolls and market makers laying off risk.
So I built a tool called The Mine to sort it.
It takes 64 million trades down to about 370 that carry the signature I’m looking for. Then I read those the way I did on the floor, synthetics and all, until I’m down to one or two worth trading.
I banked 350% in two days on Williams that way. When Walmart got its big upgrade, my October 115 calls went from $2.20 to $6.60 in less than 24 hours.
Every day at noon, I open The Mine live for my Strike Force members, and you can watch me read the flow in real time. In Strike Force, you’ll get:
- The synthetic math I use on every big trade, so you never mistake a hedge for a bet again
- How I tell a trade that’s betting on direction from one that’s only betting on volatility, before I put a dollar behind it
- The elite signals I add leverage to, about 15% of the time, and why they can cost less and pay more
- Three to five trades a week, straight from the flow I’m reading with you
The special offer to join Strike Force ends Friday.
===>Show Me How To Read The Flow
Your only option,
Mark Sebastian
P.S. On Thursday afternoon, Google traded right at $280, the exact strike that trader sold. Whether they’re up or down depends entirely on what they did with the stock, and my chart says Google is probably heading to $250. I break down trades like this one every day in Strike Force. Join me before Friday’s deadline.