Square Looks To Break Out, Options Traders Front Run A Move

Delano Saporu recommended Square Inc SQ on CNBC’s “Fast Money Final Trades” on Monday morning.

Square’s stock reversed course and headed 30% north after creating a double bottom pattern on May 13 and 19 at the $192 mark. On Monday the stock was printing a bullish engulfing candlestick indicating higher prices may come in the short term.

Bulls will want to see Square clear resistance at the $249 level and for bullish volume to come in and give the break continued upwards momentum for a move back toward the $260 mark.

On Monday a number of options traders decided to front run the anticipated move and purchased over $1.73 million worth of call contracts. The call options mostly had a strike price of $250 and one had a $260 strike. This indicates these options traders believe Square is headed towards its next resistance level.

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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 the market price for the call or put 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 Square Option Trades: Below is a look at the notable options alerts, courtesy of Benzinga Pro:

• At 12:13 p.m., Monday a trader executed a call sweep near the ask of 429 Square options with a strike price of $260 expiring on Aug. 20. The trade represented a $471,900 bullish bet for which the trader paid $11 per option contract.
• At 12:13 p.m., a trader executed a call sweep near the ask of 2167 Square options with a strike price of $250 expiring on July 2. The trade represented a $695,607 bullish bet for which the trader paid $3.21 per option contract.
• At 12:26 p.m., a trader executed a call sweep near the ask of 272 Square options with a strike price of $250 expiring on July 2. The trade represented a $93,024 bullish bet for which the trader paid $3.42 per option contract.
• At 12:26 p.m., a trader executed a call sweep near the ask of 228 Square options with a strike price of $250 expiring on July 2. The trade represented a $79,344 bullish bet for which the trader paid $3.48 per option contract.
• At 12:26 p.m., a trader executed a call sweep near the ask of 268 Square options with a strike price of $250 expiring on July 2. The trade represented a $92,728 bullish bet for which the trader paid $3.46 per option contract.
• At 12:26 p.m., a trader executed a call sweep near the ask of 233 Square options with a strike price of $250 expiring on July 2. The trade represented an $81,084 bullish bet for which the trader paid $3.48 per option contract.
• At 12:54 p.m., a trader executed a call sweep near the ask of 283 Square options with a strike price of $250 expiring on July 16. The trade represented a $217,910 bullish bet for which the trader paid $7.70 per option contract.

SQ Price Action: Shares of Square closed up 2.66% at $246.60 on Monday.