Hey trader,
A block trade in IGV, the software ETF, moved 35,000 put contracts to a higher strike today.
While that roll handed me a clear target price, I still passed on it.
A big block tells you where an institution thinks price is headed.
However, you still have to get in and out at a fair price.
That second part comes down to liquidity. Without it, you may struggle to get in and out at a good price.
Liquidity means enough buyers and sellers sit at a strike that you’re not overpaying just to get filled.
This rolled block set a $107 target in IGV.
Yet, a quick check of the option chain kept me out, and Verizon passed that same check.
It only takes a brief moment, and can improve your options trading immensely.
Here’s how it works.
What I Check Before I Trade a Block
I look at two things on the option chain. The first is open interest, which is simply the number of contracts still on the books at each strike. More open interest tends to mean more volume, which means better fill prices.
The second is the bid-ask spread. That’s the gap between what buyers pay and what sellers ask, and a wide one makes every fill cost more.
I check both in the exact expiration I plan to trade.
One expiration can have plenty of depth while the next one has very little. XLK showed me that today.
How IGV Failed the Check
IGV printed 18,000 contracts, then another 17,000 one penny higher. Time and sales showed a roll from a December 18 put at the 102 strike up to the 107.
They paid about $1.35 to move it up. That made $107 my target into December, and a break of $110 would leave an easy track there.
Then I looked at the chain. Next week’s expiration had wider spreads, and that creates an issue in IGV.
The 111/109 put vertical, essentially buying the 111 put and selling the 109, was going for about 63 cents. I didn’t really like that.
The read gave me a target and a path. The liquidity for next week’s expiration just wasn’t there, so I let it go.
Why XLK Hit the Same Wall
I moved on to XLK, the broader tech ETF, since IGV hadn’t been outperforming it. XLK looked more promising, with a break below $195 opening up downside volatility.
The 192.50 level also starts to act as a magnet for this week.
The October 23 expiration had wider spreads and no open interest. That made XLK a really tough one to trade.
This week’s expiration was workable. There just wasn’t much liquidity for next week, and that was the biggest issue.
Why Verizon Passed
Verizon gave me a read and the depth to trade it. Someone bought 2,500 of the October 23 43 calls today, along with other tranches at that strike.
I read $43 as an accelerator, since a break above it creates negative gamma. Basically, dealer hedging there speeds price up instead of slowing it down.
Call buying at 43.5 for this week adds another accelerator. A put wall at $41 acts as a backstop, and $45 starts to open up after this week.
Then I checked the chain. Four days out, Verizon had tons of depth, and 11 days out it had plenty too.
I skipped the 42.5/44 vertical at 68 cents. It buys 29% volatility and sells 26%, which raises the cost.
This is a lower-probability approach, but here’s the setup I like best:
- Setup: Buy the October 16 43 call and sell the 45 call.
- Cost: About 31 cents.
- Target: $1.20, which comes a little above $44.
- Adjustment: If Verizon slips, I can roll down for one more swing or roll out a week for about 25 to 30 cents.
- Edge: Call buying at 43 and 43.5 builds accelerators overhead, and both expirations have the depth to get in and out.
Before you trade your next block, pull up the expiration you plan to use. Check the open interest and the bid-ask spreads before you put a dollar on it.
I do that work with members every session. The 90-Day Block Hunter Challenge is where I hand you the same tools I used today.
Here’s what you get when you join:
- The Block Hunter Console, scanning hundreds of names for hidden pressure.
- 2 to 3 block alerts a week, plus one high-upside setup every Friday.
- The live Masterclass and 12 weeks of mastermind sessions with me.
- Ghost Hour from 11:30 to 12:30 EST every weekday. That’s the window when the market moves fastest and the prints tend to show themselves.
Recent Block Hunter reads include SILJ +392%, PLUG +222%, NKE +142% and GDX +72.5%.
The next block with real depth behind it might already be sitting on the Console. Your next 90 days start today, and your seat is protected by a full 30-day money-back window.
▶ Join the 90-Day Block Hunter Challenge
Brandon Chapman, CMT
Creator of Ghost Prints
