Investors were betting big on crypto and some commodities with options during slow Thanksgiving week

While eager shoppers queued up to take advantage of big discounts on consumer electronics and other holiday gift items, a handful of options traders loaded their shopping carts with commodity and crypto options. The day after Thanksgiving, Black Friday, is the busiest shopping day of the year in the United States. It is also an abbreviated trading day on an already holiday-shortened week. Consequently, trading volumes are typically well below average, and that held true on Friday. The total option volume of 20.7 million contracts was less than half the 43.6 million traded the prior Friday, November 17th. The 2.7 million individual trades were far lower than the 5.2 million trades from the Friday a week prior. Rather than contemplate whether that leftover turkey is still safe to eat three days later, perhaps it's worth looking into what the few traders who showed up on Friday were up to. While volumes were well below average overall, a few names saw well above-average volume, and a couple of key themes stood out. Crypto buying Coinbase Global Inc. (COIN) , Marathon Digital Holdings (MARA) , Microstrategy Inc. (MSTR) , and Riot Platforms (RIOT) all saw well above average volume on Friday and in each case call volume significantly outpaced put volume. The largest single print in Coinbase options was a purchase of 2,314 December $120 calls. Ultimately 6,714 of them traded, and total volume across all call contracts was 180,000, outpacing put volumes by 3-to-2. COIN has rallied over 60% since the late October lows, and while sentiment remains bullish overall, it does appear a bit extended when looking at trading range/envelope indicators such as Bollinger Bands, relative strength indicator and the like. It's possible that an institutional trader is willing to bet the rally could continue, but only with a defined risk. Another trade that definitely stood out for its rather ambitious price target was a purchase of 252 December $700 strike calls. As the chart below illustrates, MSTR would need to move very sharply higher to levels unseen since 2021 for these calls to be profitable. Is this possible? Yes, I suppose anything is. Is it probable? No. In fact, the options market itself is saying there is only a 10% chance these calls expire in the money. As an alternative consider the following options strategy, called a “call spread risk reversal”. A strategy that finances the purchase of an upside call spread by selling a downside put. (Note the expiration used here is 12/29/23, so these are Dec weekly options.) Call spread risk reversal: Bought MSTR Dec. $600 call $15.40 Sold MSTR Dec. $650 call $8.85 Sold MSTR Dec. $430 put $7.20 Net credit = 65 cents When one sells a downside put one is taking the risk of purchasing the underlying at the strike of the put that is sold. In this example, at $430 per share 17% lower than Friday's closing price. This may seem like a considerable discount, and it is, but it's worth remembering that crypto stocks tend to be highly volatile. The options market is currently implying the chance that MSTR is below $430 at year's end is 13%, so one can consider this the implied probability of incurring losses if the trade is held until expiration. The upside breakeven of this trade, where the call spread begins to see profits, is $600 and the implied probability that MSTR is higher than the $600 strike of profit with this trade is 27%, considerably better than buying the December $700 calls outright. This is a high-dollar stock, and the margin requirement for selling just one put, which represents 100 shares, is considerable and given Microstrategy is really just a proxy for bitcoin, I would consider this a speculative trade. Bearish on oil and gas It appears that Opec+, which postponed a meeting last week, may arrive at a compromise with some African producers on 2024 production levels. That the meeting was postponed at all illustrates that some oil-producing states are under pressure to support their economies and the sometimes conflicting goal of maximizing oil prices and maximizing local revenues aren't always compatible. Several oil ETFs including the ProShares Ultra Bloomberg Crude Oil ETF (UCO) , ProShares Ultra Bloomberg Natral Gas (BOIL) , and ProShares UltraShort Bloomberg Natural Gas (KOLD) traded well above average options volumes on Friday. The options flow in these ETFs suggests traders are betting on lower oil and gas prices. So bearish bets were seen in UCO and BOIL and bullish bets were seen in the inverse ETF, KOLD, and directionally those bets were consistent with a bearish put/spread collar that printed in the United States Oil Fund (USO) . In a put spread collar, an upside call is sold to help finance the purchase of a downside put debit spread, the one in this illustration traded on Friday: Put spread collar: Bought 2000 USO Dec. $70 put $1.20 Sold 2000 USO Dec. $67 put 53 cents Sold 2000 USO Dec. $75 call 52 cents It should be noted that this type of trade is often used to help hedge a long position, and that may be the case here. The trader who put this trade on may have exposure to oil either through the commodity itself or a portfolio of oil and gas stocks. Bullish mining positions While options traders were not betting on a near-term rebound in oil and gas, they do appear to believe that the recent recovery in two mining stocks may have more room to run. Hecla Mining Co. (HL) saw a lot of call activity, trading double the average daily call volume on Friday. The near-dated activity was in the December $5 and $6 strike calls. The trade in Royal Gold, Inc. (RGLD) was a bit different, a good size seller of the December $110 puts is willing to get long the stock at that strike price. Put selling is best described as neutral to very mildly bullish. A put seller is willing to collect small amounts of premium to provide downside protection or insurance to someone else. Whether very bullish as the Hecla options trader is, or only mildly so as is the case here, both names appear to reflect the view that both stocks may be reversing off their recent lows. Several big names will be reporting earnings, here is a table of those that have weekly options, their earnings-related implied moves, and our options sentiment score. As always, the names we hold in our event fund are highlighted in green. DISCLOSURES: (Long Workday, Intuit, Dollar Tree, Kroger, Marvell Technology) THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . 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