What Happened: Unity Software Inc (NYSE: U) closed up 5% on the day with option traders aggressively trading the stock. While the price action has been volatile with two 5%+ swings up and down, the stock is holding onto gains on over 7.6 million shares traded Thursday, just above its 10-day average of 7.2 million shares.
Meanwhile, options traders have traded over 85,000 contracts on the day, with approximately 72,000 of them being calls and roughly 13,000 of them puts (image below).
This translates to over 84% of the options traded being calls, which represents a strong bullish bias.
Why It Matters: Prior to Thursday, there were approximately 180,000 calls and 119,000 puts, for a total of 299,000 options with 60% of those being calls. The volume of option contracts today represents a 28% increase in the total options in one day, with the majority of them being bullish.
Anytime you have a strong increase in the total options traded in one day, it can adjust the option flows and strikes up or down. And with the heavy call bias on the day, the view is much likely more bullish.
What’s Next: Prior to Thursday, the largest strike by open interest for the short-dated expiry (Nov. 19) was the $200 strike. However, the volume for the $210 strike today is 70% higher than the $200 strike (image below).
It should be noted the session high today was $210 exactly.
Looking ahead, Unity Software does not have weekly expiries, so the next op-ex is Dec. 17. The largest strikes by volume are between $210 and $220, but by open interest are the $220 and $260 strikes.
Hence, there may be fuel for a really strong bullish run up to $260 by next month, however current volumes suggest not much interest beyond the $220 strike.
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