Transcription
In a testament to the exchanges, SK Hynix options are available to trade right now. Um, SK Hynix is the South Korean AI company, whatever it does. I'm not sure.
But, it has become the new hotness in the market right now, kind of nudging out SpaceX, which was the, you know, stock of the moment when it came out with its IPO. SK Hynix's IPO started last Friday, and as of today, Tuesday, July 14th, they launched options. And that is both for SpaceX and SK Hynix. That is really fast option introduction, or you know, when the when the exchanges actually offer them to be trading. That is awesome speed, and that's the way everything should be opened up.
So, anyway, let's take a look at SK Hynix itself and its options. It's volatile. I mean, looking at a chart, it's it's been trading for what? 2 days, 3 days? Let's have the Let's have the symbol pop up here. This is SKHY. Yeah, it's trading 3 days. This is a nice bar chart. I'm not sure what it's supposed to tell you, but it had a massive sell-off when they when they launched the stock. Kind of like SpaceX. Well, SpaceX didn't drop quite that much. Um, and then they rallied up.
Interestingly, the stock's rallying up on the day that they listed options. SpaceX wasn't quite so lucky. A lot of folks used I think the options on SpaceX to get short the stock because they couldn't borrow it. Not sure what's going on with SKHY, but that is that's something to certainly to keep in mind.
One thing I want you to take a look at though, is first of all, opening up these options, this is all volume today. There's no Let's find open interest. I'll just I just want to prove the point to you. There's zero open interest. Why? Because they just started trading options today. The options just started trading today. And if you bought or bought or sold something and created an open position, that would be indicated by open interest, that happens overnight. In other words, everything is settled up overnight. So, we won't see today's trading activity show up in open interest until tomorrow.
Um so, open interest is zero for all this stuff, but if you look at volume, and it's very easy to change the columns here. Um volume is huge. Let me zoom in a bit, uh so you can see these numbers. 6,000 contracts traded at 140 puts. Um 8,000 of the 150 puts. Let's see on the call side. Um 9,000 traded of the 180 calls. So, there's a lot of activity. Let's go out Oh, this is the 3 days. Let's go out to 38 days. Again, a little lighter on the volume, but still pretty respectable for um for a brand new stock. Uh stocks The stock itself is 3 days old. The options are brand new.
Um these markets are a little wide out here in the August. Let's take a look in the Julys. 15 cents wide, 10 cents wide, 10 cents wide, 5 cents wide. That's great. Why is that great? First of all, it's a It's It's not a low-priced stock. It's not like it's $15 or $18. It's 185. So, it makes the options a little bit bigger priced, uh a little bit higher priced. Uh and anytime you get more risk, uh the markets tend to be a little bit The bid-ask spreads tend to be a little bit wider. The volatility is 160 160%.
Now, when SpaceX options came out, their 3-day volatility over 200%. So, maybe the market's learned its lesson and said, "Eh, maybe, you know, SpaceX really um turned out to be not quite as volatile as it was." Because right now, SpaceX uh short-term volatility SP um CX is SpaceX. Yeah, SpaceX volatility 3 days is 84%. So, it's about, I don't know, 40% of what it was less than or maybe 30% of what it was um when it first came out. And you can see that on a chart here. Uh if you look at um SpaceX, here we go. And this line here, again, SpaceX hasn't been trading very long, either. But, it sold off pretty pretty quickly after they introduced the options. SpaceX has been getting to hammered. The um this is the chart of the implied volatility, the overall volatility. Uh it was higher when it came out, when they introduced this stuff. And it's been drifting down ever since.
So, if you see SK Hynix, SK Did I get that right? SKHY Um it's going to take me a little practice to get the symbol right. Um there's no volatility number yet uh because it today is the first day of options trading and the that volatility number, that volatility chart, comes from the options.
If I were going to trade SK Hynix, I would stick with the three days. Why? Because the markets are tight and that's it. There's lots of trading activity in there today. Um what's the skew pointed towards? Uh stock is 184, close enough to 185 uh for for this purpose. So, let's go down 10 points. Uh 85 to the 70 175, uh the ask price is 590 on those puts. Up 10 points to the 95s is $6. So, they're leaning a little bit towards the upside um um, for uh SK Hynix.
Um if you're going to trade this, I would strongly suggest defined risk trades. Um, if I go in here, let's just let's just put an order create an order. Uh, if I were going to sell these 160 these 160 puts, $15,790 of buying power requirement. That's basically it's the cash value of that strike price. Okay? So, these are even though this is a margin account, they're treating these options as if they're the they're cash cash secured. Okay? So, the the the the exchanges and the brokerage firms aren't giving you any credit for, you know, the standard the sort of margin requirement.
So, because the margin requirements are so high and because the max profit, even though it's $200 versus $16,000 of capital requirement, isn't a good return on capital. I would verticalize this, is that a word? Well, I'm making it up now. I would verticalize it by buying a 155 put against it. Create a short put vertical short put spread. Taking $63, and again, the buying power effect is for is the max risk of that trade, which is five points, $500 minus $60 here right now is the is the credit, which is going to be $440. So, much smaller numbers, much more manageable capital requirements. And yeah, it's I've been you know, I've seen some pretty big moves against me in SpaceX. I would expect to see some pretty big moves again in the SK Hynix, or as I call just Sky High or whatever you want to say. So, Sky, you're going to see some pretty big moves in this stock. Use defined risk trades and don't trade too big.
Um, and expect I I not my take, I would not buy options in here. Don't Don't say, "Well, gee, I think it's it's going to rally, so I'm going to buy these 215 calls." I would not do that. Why? Because if this number comes down, um if this if this goes out to, you know, 122 volatility in August, 112 volatility in September, if that stuff comes down to SpaceX volatility, even even it's a little bit higher, even if it's going to go to like 90 or or 100 volatility compared to 80% SpaceX, they're going to take the premium down in these options. You got to be careful of that.
That's why I would suggest if you were going to trade this thing, um if you're bullish, if you're bearish, sell a call vertical, the 200 205 maybe. Again, takes in a dollar five versus $395 of buying power. Same thing on the put side. If you're bullish, sell a put spread. If you're bearish, sell a call spread. That's Sky uh SK Hynix options. Uh like I said, I would stick to the three days for now where the markets are tight. Take advantage of the high implied volatility by shorting options. Don't buy options in here. And use defined risk trades.
Remember, none of this is a trade recommendation. If you want to trade SK Hynix or anything else, that's your choice. And please, do not take any more risk than you are comfortable with.