QQQ Stock – Why Did QQQ Options Traders Purchase Almost $3M Of Puts?
The Invesco QQQ Trust Series 1 (NASDAQ: QQQ) was trading relatively flat Wednesday on very low volume.
Despite not showing substantial signs of weakness, a number of institutions purchased a considerable number of puts, betting over $2.99 million the QQQ Trust Series is either headed lower or they’re unsure and wanted to hedge bullish positions. This could be due to the following two possibilities:
- Technology sector weakness: Apple Inc (NASDAQ: AAPL), Microsoft Corp. (NASDAQ: (MSFT)) and Amazon.com Inc (NASDAQ: AMZN) are the top three holdings in the QQQ Trust Series 1, making up 10.94%, 9.70% and 8.38% of its total, respectively. Its largest holdings were mixed on Wednesday with Apple and Microsoft trading lower while shares of Amazon were trading higher.
- Market turmoil due to a meme stock short squeeze: GameStop Corporation ((NYSE: GM)E) and AMC Entertainment Holdings Inc (NYSE: AMC) soared on Wednesday, looking like another larger short squeeze could be on the horizon. When GameStop and AMC skyrocketed in January, major indexes and the QQQ Trust Series fell. Between Jan. 25 and Jan. 29, the QQQ lost 5% of its value before reversing back upwards after most meme stocks plummeted.
Why It’s Important: When a sweep order occurs, it indicates the trader wanted to get into a position quickly and is anticipating an imminent large move in stock price. A sweeper pays market price for the call option instead of placing a bid, which sweeps the order book of multiple exchanges to fill the order immediately.
These types of call option orders are usually made by institutions, and retail investors can find watching for sweepers useful because it indicates “smart money” has entered into a position.
The Option Trades: Below is a look at the notable options alerts, courtesy of Fintech Zoom Pro: