Option Trader Making Aggressive Bullish Play On Square

Square Inc SQ stock traded lower by 1.5 percent Friday and is down 4.8 percent over the past week amid a broad market sell-off. Despite the weakness, one option trader was making extremely aggressive bullish bets on Square.

The Trades

On Friday morning, Benzinga Pro subscribers were alerted to a bullish purchase of 501 Square call options at a $64.50 strike price that expire on May 17. The calls were purchased at the ask price of $2.823 and represent a $141,432 bullish bet at a break-even price of $67.323. The price suggests 3.5 percent upside for Square within the next week.

Shortly thereafter, a second purchase of an additional 538 of the same Square call options. This time, the buyer paid a higher price of $2.93, bringing the total bullish bet on Square up to $299,066.

Options Insight

Even traders that focus exclusively on the stock market watch the options market closely to gain insight into what option traders may be thinking. Due to the relative complexity of the options market, options traders are generally seen as more sophisticated than the typical stock trader. Large options traders are often institutions or wealthy individuals that may have a unique perspective and/or advanced information on a given stock.

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Playing The Bitcoin Bounce?

After a disastrous 2018 for cryptocurrency, bitcoin prices have rebounded by 63.6 percent so far in 2019. Square reported $65.5 million in bitcoin trading revenue in the first quarter, up from just $52.4 million in the fourth quarter of 2018.

Given a resurgence in bitcoin prices, the bullish option trader on Friday may be betting Square could be a potential buy-the-dip target for traders next week if global financial markets stabilize.

Unfortunately, there’s no way to be 100 percent certain whether the buys are a standalone position or a hedge against a larger stock holding. Given the total order size was less than $300,000, Friday’s Square call buys are unlikely to be a hedge.

Square's stock traded around $65.36 per share at time of publication.

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