Flow Review September 2024: Unusual Shorting Flow and how to Spot PUT Writing with $CRWD

In this review, we’re going to cover unusual shorting activity on options contracts. First, we’ll cover a months-ago put writer who held through a shocking amount of drawdown. The exit on this trade also serves as a good example of “Bid-side flow doesn’t ALWAYS mean “Sold” contracts”.

To start us off here, we’ll be looking at a put writer on Crowdstrike Holdings Inc. $CRWD.

Back in July 2024, our team noted unusual options activity on $CRWD that came in on the $240 put strike expiring on September 20th, 2024.

Right at market open 8:30am Central Time, 3,700 contracts of $240P 9/20/2024 hit the tape, entirely at the BID for an average price of $6.72 per contract, totaling a credit of $2,430,875 received. At the time of fill, the $CRWD stock price transacted at $294.50 per share; this is a crucial piece of information to understand just how dramatic the drawdown this trader sat through was.

Throughout the rest of the morning session on 7/19, it seemed the trader was already reaping some benefits as the $CRWD stock price rose, bringing the value of these $240P contracts to a low of $4.70. However, as the day went on, the $CRWD stock price took a turn to the downside, and the value of these contracts rose to a high of $8.00 on the day. The trader’s situation only got worse from there.

From the point of the trader’s entry at $294.50, 18.5% out of the money for the $240P, the Crowdstrike stock price tumbled dramatically over the next month. Over the next few days, $CRWD hit lower lows day after day, coming to its local bottom at a low of $210.50 per share. The contracts quickly gained value during this time, rising in value to a peak of $43.70 per contract; a 550% rise from the point of entry at $6.72. 

To put that into perspective, our trader sold these contracts for a total credit of a bit over $2.4 million. At that peak in value, his 3,700 contracts had a value of $16,169,000. You read that correctly; sixteen million dollars. 

This means that if the trader closed their position, they’d have done so at a loss of nearly $14 million. If the trader had been assigned, they would have had to purchase 370,000 shares of $CRWD at a price of $240 per share, while $CRWD was trading at just $210. The trader still didn’t close their position.

Now, let’s see how our $CRWD trader fared.

From the low of $210.50, $CRWD reversed to the upside. Within a week, $CRWD was back trading above $240 per share, and within two weeks, above $280 per share. While the price still traded significantly lower than this trader’s entry price, the Greek Theta (the depreciation of a contract’s value each day as it approaches expiration. Remember, with Theta, the closer to expiration, the higher Theta’s effect) did its job. 

As the contracts neared expiration, and lost their in-the-money status, time’s effect on their value started to take its toll. 

With each passing day while $CRWD traded in a range between $242 and $286 per share, the contracts lost value little by little, and by August 19th into the 20th, this trader was finally profitable on this position again. On 8/22, the contracts hit a low of $4.88. 

As we broke into the month of September, the trader maintained their position without selling. Finally, on September 19th, the Unusual Whales team noticed a transaction of over 3,000 contracts with a total volume over 3,700 on the day.

The sizing is almost identical to the original entry we noted back in July; so while this transaction occurred at the bid, the bid-ask spread was quite tight on a low valued contract, so given the sizing, the timing before expiration, and the scary drawdown of over $14 million, it’s safe enough to assume this is that same trader exiting their position. 

NOTE: This post is not financial advice. The stock market is risky, and any trade or investment is expected to have some, or total, loss. Please do research before any trade. Do not use this information for investment decisions. Check terms on site for full terms. Agree to terms before considering this information.