Crowdstrike Falls 7%: Are Option Traders Selling?

What Happened: Crowdstrike Holdings Inc CRWD is down over 7% Monday on strong trading volume with over 3.9 million shares versus the 10-day average of 3.8 million.

Looking at the options market, there's solid activity brewing with over 34,000 contracts traded on the day with approximately 18,000 calls and 15,000 puts (image below).

Prior to Monday, Crowdstrike had approximately 118,000 calls and 177,000 puts for a total of 295,000 options with 60% of them being puts, so a tad bear heavy. It's important to note with the solid premiums the stock offers, a decent portion of those puts would have been cash secured puts (i.e. sold puts), which is actually a bullish view.

Be that as it may, Monday's flows represent 11% of the total options in the stock, hence a robust amount of activity.

Why It Matters: Anytime a stock trades 10% or more of its options in one day, it represents a strong level of activity from option traders, suggesting they're actively trading this decline.

Prior to today's trading activity, about 16% of the options are short-dated (i.e. expiring Friday), which is roughly 47,000 options. These options expiring could apply some downside pressure on the stock as it gets closer to the expiry.

What's Next: In a strange twist with the stock dropping so much on the day, the majority of options activity is not in the short-dated options. Rather, it's spread out over the next four to five expiries. This suggests option traders are not day trading Crowdstrike's move lower today and are looking out over the next few weeks towards the December monthly op-ex.

Looking ahead to the Dec. 17 expiry, the top strike by volume on the put side is the $240 strike, and the top strikes by open interest are the $220 and $240 strikes (image below).

This is suggesting bearish traders are seeing a potential range between $240 and $220 by next month. However, should the stock rally above $250 this week, then there is room for a potential move up to $270 which was the relative highs last week.