Why Did QQQ Options Traders Purchase Almost $3M Of Puts?

The Invesco QQQ Trust Series 1 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 AAPL, Microsoft Corp. MSFT and Amazon.com Inc 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 GME and AMC Entertainment Holdings Inc 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.

See Also: AMC Entertainment Skyrockets And Options Traders Pile In

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.

See also: Best Penny Stocks Under $1

The Option Trades: Below is a look at the notable options alerts, courtesy of Benzinga Pro:

At 9:32 a.m., Wednesday a trader executed a put sweep, near the ask, of 502 Invesco QQQ Trust Series 1 options with a strike price of $333 expiring on May 26. The trade represented a $31,626 bearish bet for which the trader paid 63 cents per option contract.

At 9:33 a.m., a trader executed a put sweep, near the ask, of 468 Invesco QQQ Trust Series 1 options with a strike price of $333 expiring on May 26. The trade represented a $34,164 bearish bet for which the trader paid 73 cents per option contract.

At 9:36 a.m., a trader executed a put sweep, near the ask, of 500 Invesco QQQ Trust Series 1 options with a strike price of $333 expiring on May 26. The trade represented a $35,000 bearish bet for which the trader paid 70 cents per option contract.

At 9:42 a.m., a trader executed a put sweep, near the ask, of 750 Invesco QQQ Trust Series 1 options with a strike price of $320 expiring on June 4. The trade represented a $64,500 bearish bet for which the trader paid 86 cents per option contract.

At 9:42 a.m., a trader executed a put sweep, near the ask, of 880 Invesco QQQ Trust Series 1 options with a strike price of $334 expiring on May 26. The trade represented a $117,040 bearish bet for which the trader paid $1.33 per option contract.

At 9:43 a.m., a trader executed a put sweep, near the ask, of 750 Invesco QQQ Trust Series 1 options with a strike price of $320 expiring on June 4. The trade represented a $65,250 bearish bet for which the trader paid 87 cents per option contract.

At 9:50 a.m., a trader executed a put sweep, near the ask, of 1000 Invesco QQQ Trust Series 1 options with a strike price of $334 expiring on May 26. The trade represented a $142,000 bearish bet for which the trader paid $1.42 per option contract.

At 10:00 a.m., a trader executed a put sweep, above the ask, of 704 Invesco QQQ Trust Series 1 options with a strike price of $330 expiring on May 28. The trade represented a $76,032 bearish bet for which the trader paid $1.08 per option contract.

At 10:40 a.m., a trader executed a put sweep, near the ask, of 3000 Invesco QQQ Trust Series 1 options with a strike price of $306 expiring on June 4. The trade represented a $75,000 bearish bet for which the trader paid 25 cents per option contract.

At 10:43 a.m., a trader executed a put sweep, near the ask, of 1000 Invesco QQQ Trust Series 1 options with a strike price of $320 expiring on Aug. 20 trade represented a $922,000 bearish bet for which the trader paid $9.22 per option contract.

At 11:21 a.m., a trader executed a put sweep, near the ask, of 1100 Invesco QQQ Trust Series 1 options with a strike price of $332 expiring on June 4. The trade represented a $304,700 bearish bet for which the trader paid $2.77 per option contract.

At 12:00 p.m., a trader executed a put sweep, near the ask, of 2038 Invesco QQQ Trust Series 1 options with a strike price of $315 expiring on July 16. The trade represented a $949,708 bearish bet for which the trader paid $4.66 per option contract.

At 12:41 p.m., a trader executed a put sweep, near the ask, of 100 Invesco QQQ Trust Series 1 options with a strike price of $320 expiring on June 14. The trade represented a $949,708 bearish bet for which the trader paid $1.82 per option contract.